What happened
The lofty gains that Global-E (GLBE 2.54%) had racked up last year are coming undone in grandiose fashion. Shares were down 10.4% today as of market close. In total, the stock is now 47% off its all-time high notched last September, with most of those losses coming in recent weeks on fears of rising interest rates.
Image source: Getty Images.
So what
Global-E is a fast-growing e-commerce software company, providing tools for merchants that want to sell internationally. As digital buying and selling picks up steam in emerging markets, Global-E's revenue has soared. Sales increased 77% year over year to $59 million in Q3 2021 alone.
Building on its success since its IPO last spring, the company announced the acquisition of cross-border selling peer Flow Commerce for up to $500 million (payable in equal parts cash and stock). At the same time, Global-E also paid software giant Shopify a warrant for $70 million worth of its shares for an expansion of their partnership (since Global-E's software integrates with Shopify's ecosystem of selling tools). Global-E revealed that Netflix was one of the first merchants to make use of the software partnership as the TV-streaming leader expands its presence internationally.
As fast as Global-E is growing, though, investor over-optimism is being punished. Even after the sharp decline, Global-E is trading for 24 times expected full-year 2021 sales to enterprise value and over 200 times adjusted EBITDA.
Now what
The Federal Reserve has set the table for a few interest rate hikes in the coming year to try to tame inflation, and high-growth but richly valued stocks are taking it on the chin. Nevertheless, while higher rates are proving to be the catalyst for what was bound to be an eventual sell-off in Global-E, that doesn't change the company's rosy prospects. E-commerce still has a long runway of growth ahead of it, and companies like Global-E that provide the tools to make it all possible could be some of the most profitable ways to invest in digital commerce's development. Expect the company to provide a financial update on Q4 2021 sometime in February.
