Many Silver Linings to STMP's Recent Skid

The slide started on Feb. 18 after a post-earnings bear gap

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Online mailing and shipping company Stamps.com Inc. (NASDAQ:STMP) is fresh off a post-earnings bear gap of 15.7% from Feb. 18. Today, STMP is up 7% to trade at $194.67, on track to snap an unheard of nine-day losing streak. However, the damage was contained by the shares' 320-day moving average. And longer term, the equity remains up 38% year-over-year.

STMP Stock Chart

There's more silver linings; in its February report, Stamps.com highlighted increases in revenue, net income, and earnings. Stamps.com revenue increased 28% year-over-year, and its net income grew 129%. STMP's earnings were also up 95% from the same period last year. The latest selloff was not caused by its financial performance. It was sparked by the company’s 2021 outlook.

In its press release, Stamps.com acknowledged that the surge in e-commerce has largely been due to the pandemic, resulting in meaningful financial benefits for the company. The company also stated that, “despite those financial benefits, there is substantial uncertainty in 2021." Nonetheless, Stamps.com ended its statement by emphasizing plans to continue expanding and investing in their platforms, pointing out an expected 20% increase in operating expenses for 2021.

The February slide put STMP firmly in oversold territory, with its 14-day Relative Strength Index (RSI) last seen at 28. This could indicate a short-term bounce is in the cards. And for traders looking to take a flier on the stock, it's a good time to target near-term options after a post-earnings volatility crush, according to STMP's Schaeffer's Volatility Index (SVI). This reading of 58% sits just seven percentage points from a 12-month high, meaning volatility expectations are relatively muted at the moment for short-term contracts.  

 

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