While many e-commerce stocks are trading down at the moment amid the broader fall of growth stocks in recent months, this industry is still full of tremendous opportunities for long-term investors. In this segment of Backstage Pass, recorded on Jan. 12, Fool contributor Jamie Louko dives into one exciting e-commerce stock that investors should take a second look at right now.
Jamie Louko: I'm going to go with a slightly more boring industry here, although I really, love it. We're going to go with e-commerce here. The company I'm going to go with is Global-e Online (GLBE 1.17%).
Just some perspective for the e-commerce industry as a whole, the global e-commerce industry is relatively under-penetrated internationally as opposed to in the Americas. Personally, I probably buy more things online than I do in person. But that's not really the case with the international markets. The market share globally in 2024 e-commerce was 18% of total retail sales.
But in 2024, that's expected to grow to 22%. We're seeing this growth internationally from the entire e-commerce industry that's bringing the total market share of e-commerce as a relation to total retail sales up. In 2024, the total global e-commerce industry is expected to be $6.4 trillion.
That's where Global-e Online comes in. The company provides tools that make it easy for e-commerce companies to expand internationally, and the key there is internationally. With this international industry expanding, I think Global-e could be a major beneficiary from that. Global-e has experience and partnerships across the world in 100 different currencies, hundreds of payment methods, and over 20 shipping providers in dozens of languages. That makes it easy for them to help domestic businesses, expand internationally.
Some of these small, medium-sized businesses don't have the ability to use different payment methods or don't even know that some payment methods exist internationally. Global-e can really help them get set up with these payment methods or get the website up and running in different languages, things like that.
Another really important thing that I like with Global-e is it has a partnership with Shopify (SHOP 5.66%) that gives Shopify merchants access to Global-e's services. Considering the Global-e's market as the SMB market, the small and medium-sized business market, I think this partnership with Shopify is really beneficial to the business and it has paid in financial terms for the company.
The revenue grew 77% year-over-year in Q3 to $59 million. But what I find impressive is their customer churn rate is just 2%. That really shows how sticky this business is.
Once you're on and you're able to use these different currencies and accept these different payment methods, it's hard to churn away from Global-e and do this all in-house, especially when you're a small business.
That churn rate, really important in my book and I want to see that staying very low in the future. Customers are adopting the products more often, their net retention rate is 140%, meaning customers are spending 40% more today than they were in the year-ago quarter.
One thing that I just want to note really quick that I'd like to see is their gross margin increased over eight percentage points, not 8%, eight percentage points from 30 to 38.5.
If they can keep doing that and bring more of that money down to the bottom line in gross profit and then hopefully net income, I think that the company will be able to grow massively and capitalize on this international e-commerce market.
