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Why Stamps.com Inc. (STMP) Is Better Than Apple Inc. (AAPL)

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When I say Stamps.com Inc. ( STMP ) is better than Apple Inc. ( AAPL ), you probably think I smuggled in some spiced paprika from my recent trip to Hungary.

Why Stamps.com Inc. (STMP) Is Better Than Apple

Most people might think Stamps.com offers a useless product - after all, more people are moving their bills and even holiday cards to the Internet.

Just hang with me, and let me explain.

But in truth, it's a time-saver for businesses and high-volume postage-using individuals. Just as we are willing to pay higher prices at a convenience store for the convenience, so too are STMP customers.

Stamps.com just destroyed estimates with some impressive numbers . Customized Postage revenues rocketed 167% higher year-over-year while Mailing and Shipping revenues soared by 84%. Customized Postage's gross margin was 17.8%, but thanks to a whopping 84.3% gross margin in Mailing and Shipping, total gross margin finished at 82.1%.

Net income was $13.2 million, or 71 cents per share. Moreover, GAAP net income was impacted by a number of one-time elements to the tune of $18.8 million, so non-GAAP net income was $32.0 million or $1.72 per share. Thus, non-GAAP net income and fully diluted EPS increased by 163% and 139% year-over-year, and those adjusted earnings killed Street estimates of 25 cents per share.

Meanwhile, the company upped 2016 guidance from $5-$5.50 per share to $6-$6.50 per share.

That's a stellar quarter - one worthy of the 15% surge that STMP stock enjoyed in Monday's after-hour trading, and makes today's sudden selloff utterly head-scratching.

The good news for Stamps.com is that these numbers come from a base of only 650,000 customers. Although it has been around for awhile, it has the opportunity to increase that base, as it has made some good acquisitions. The rise of at-home businesses using Amazon.com, Inc. ( AMZN ) and eBay Inc ( EBAY ) as selling platforms is helpful. People are also fed up with the U.S. Post Office, and if they mail stuff in any kind of volume, Stamps.com offers a great solution.

Also, STMP's market cap is $1.5 billion. That leaves it plenty of room to grow organically and also deliver good returns for shareholders.

On the other hand, there are many bearish elements to the company as well - such as high churn rate and investigations into its advertising practices - and some of them may well turn into weights on the stock's ankles.

Thus, trading Stamps.com on either side is more likely to yield decent returns in the short-term than AAPL.

Why STMP Trumps AAPL Right Now

In the short-term, Apple is dead money. The stock is very much off its highs, and there has been a lot of skepticism surrounding the company after its last earnings report.Roughly 70% of revenue comes from outside the U.S., and the iPhone's percentage of revenues is a similar amount - a problem considering the iPhone has been stumbling.

Right now, then, AAPL is a "show me" stock, and there isn't anything to show until the next earnings report. That in turn means that Apple is likely stuck in a narrow trading range between $90 and $98.

Stamps.com, however, could have a range of $25 in either direction - and its flip from 15% up to 4% down today shows just how wild STMP stock can be.

My argument is that in the short-term - especially given today's wonky trading action - there is far more potential upside in playing STMP (again, in either direction) than AAPL.

Over the long-term - and this is where things get hinky - is that Stamps.com could actually outperform Apple as far as returns. This assumes the bearish arguments are all wrong. It also assumes STMP continues to grow. But it is a lot easier for a $1.5 billion company to produce multiples on one's investment than a $500 billion company.

One last thing, though. Great reward means great risk. Pay attention to those risks. Apple isn't going anywhere. STMP might go away.

Lawrence Meyers is the CEO of PDL Capital, a specialty lender focusing on consumer finance. He has 20 years' experience in the stock market, and has written more than 1,200 articles on investing. He also is the Manager of the forthcoming Liberty Portfolio. Lawrence Meyers can be reached at TheLibertyPortfolio@gmail.com . As of this writing, he was long AAPL.

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The post Why Stamps.com Inc. (STMP) Is Better Than Apple Inc. (AAPL) appeared first on InvestorPlace .

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.


The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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