Wall Street has not been kind to USPS postage resellers this year. Its latest victim? Long-time postage meter manufacturer and USPS postage reseller Pitney Bowes (NYSE:PBI). Pitney Bowes stock fell over 24% today, tumbling to a new 52-week low of $5.28 during intraday trading. Investors are understandably freaking out and selling off shares left and right. However, this drop in Pitney Bowes’ stock price doesn’t change the fact that the company is still positioned to succeed as the global retail trend continues to move towards eCommerce.
The Reason Why Pitney Bowes Stock Fell Today
The dip in Pitney Bowes stock isn’t exactly unwarranted. The company released its quarterly earnings report before markets opened today, and the numbers were less-than-stellar. Total revenue fell 3% year over year, and the company adjusted its earnings to $0.12 per share on revenue of $868 million. This marked a significant decrease from analysts’ forecasts of $0.21 per share on revenue of $866 million.
Whenever a company misses analyst estimates like this, the market typically reacts negatively by sending the stock price down. That’s exactly what’s happening with Pitney Bowes.
Don’t Let The Losses Scare You
While today’s earnings report has investors worried about the company’s turnaround strategy, it’s not necessarily out of the blue. Pitney Bowes has long been planning to alter its business model in order to capitalize on eCommerce and the new global shipping trend. The big reason behind Pitney Bowes’ revenue decline is the fact that the company is moving away from legacy products such as postage meters.
Postage meters are lucrative for the company, but they simply aren’t relevant anymore. Be honest. When’s the last time you used a postage meter to ship something? Never? That’s what we thought.
Amidst all the bad news, there’s a nugget of truth that we need to pay attention to. The direction that Pitney Bowes wants to head in is commerce services…and they are succeeding. According to the same earnings report, the company’s commerce services revenue increased 5% year over year to $401 million. This sector of Pitney Bowes’ operations actually made up the largest component of overall revenue for the second quarter in a row!
It’s All Part of the Plan
A lot of Wall Street bears argue that Pitney Bowes stock is a death trap. They point to the stock’s 70% decline over the past three years as a huge red flag. We won’t lie: those kinds of statistics aren’t exactly a good thing. However, Pitney Bowes’ continued revenue growth in commerce services proves the company’s turnaround is just getting started.
CEO Marc Lautenbach weighed in on the matter in a statement that accompanied the earnings call.
“Clearly, we are not pleased with our profit performance, but are confident that the actions we are taking will improve profitability and continue to position us for sustained growth for the long-term,” he said. “We continued to make progress against our long-term objectives as we move our portfolio of business to the growth areas of the market.”
Why Pitney Bowes Will Succeed In the Next Few Years
Since Stamps.com severed their relationship with USPS, Pitney Bowes is positioned to be the leading USPS postage provider for eCommerce businesses. eCommerce is where the world is heading, and Pitney Bowes is going to help take us there. The company’s consecutive quarterly revenue growth in commerce services is cold hard proof of that. Also, let’s not forget that their biggest competitor—Stamps.com (NASDAQ:STMP)—isn’t even the ball game with USPS anymore!
The bottom line? Today’s trading session may not be indicative of the company’s future. Pitney Bowes is in it for the long haul, and as eCommerce continues to grow, so too will Pitney Bowes.