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Why Stock Just Jumped 27%

What happened

Shares of at-home-postage provider (NASDAQ: STMP) are up 27.3% as of 10:45 a.m. EDT.

So what

This being earnings season, you're probably guessing that stock's surge has something to do with an earnings report -- and you're right.

Wednesday evening, after close of trading on the Nasdaq, reported its fiscal Q2 2017 results. Earnings more than doubled to $1.71 per share on a sales increase of 38% year over year (to $116.1 million). Analysts had only been looking for $1.65 in profit per share (and probably only pro forma at that), with sales of just $99.2 million.

Naturally, investors were pleased with the beat. posted an early Christmas present to investors on Wednesday. It arrived Thursday morning. Image source: Getty Images.

Now what

They should prepare themselves to continue being pleased. Factoring Q2's strong performance into its guidance, said it now expects to close out this year with GAAP profit anywhere from $5.15 to $6.07 per share, and sales of between $435 million and $460 million. The new numbers call for profits per share $0.37 higher than had previously expected. Sales are now looking to come in about $30 million ahead of previous estimates.

So what does this mean for the stock? After Thursday's bump, stock carries a market capitalization of roughly $3.3 billion and a share price just north of $196. At the midpoint of new guidance, stock sells for about 35 times earnings, which sounds very expensive.

In fact, it probably is very expensive if slows down to analysts' long-term expectation of 21% annualized earnings growth. Then again, these are the same analysts who were wrong about in Q2. shareholders can only hope the analysts will keep being wrong in quarters to come.

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