The global economic slowdown has caused e-commerce stocks to tank. With inflation reaching its highest point in decades in many countries, investors are worried consumers will pull back spending on discretionary goods, like those commonly sold on e-commerce sites.
Some businesses operating in this space have already seen a pullback in demand, and the market is punishing e-commerce stocks as a result -- Global-E Online (GLBE 0.33%) is no exception. Global-E helps its customers accelerate their cross-border sales and adoption by creating a seamless, localized experience for shoppers. The company has also streamlined logistics and returns for its customers, making it easy to do business anywhere in the world.
Shares of Global-E have plunged 46% year to date, despite posting robust second-quarter results and announcing a partnership with one of the most influential brands on earth: Walt Disney. Here's everything you should know about this deal, and why you might want to take a closer look at Global-E.
Disney: Global-E's newest customer
On Aug. 16, Global-E announced it had inked a partnership with Disney to help the media giant with its direct-to-consumer e-commerce efforts in the Asia Pacific region.
Beyond the upfront revenue potential, what's more exciting is Disney could expand its relationship with Global-E in the future. Disney is only in the initial phase of its rollout right now, but Global-E management expects Disney to grow their partnership into different geographies and outside of Asia going forward.
Increasing usage of Global-E's skillset isn't uncommon for customers: Since 2018, the company has typically had a net revenue retention rate above 140%, and in 2021, it was 152%. That means existing customers increased their spending with Global-E by over 50% between 2020 and 2021.
More importantly, landing Disney as a customer is a testament to Global-E's value and leadership in the industry. It also shows that developing in-house cross-border e-commerce solutions can be extremely difficult, even for a $200 billion company like Disney.
Global-E's success aside from Disney
Even without Disney, Global-E has proven its worth. Since 2018, the company has typically had a churn rate of 2% or less, another signal of how critical its services are to customers. And during this challenging macroeconomic period, customers have continued to rely heavily on the company as second-quarter gross merchandise volume soared 64% year over year to $534 million, while revenue jumped 52% to $87 million.
The company also extended relationships with multiple existing customers, most notably Adidas. In the first quarter, Global-E announced that Adidas was using its services to sell in 16 markets with more to come over the coming quarters, and on the latest earnings call, management said, "During Q2, we also expanded our activity with brands such as Adidas and Suunto, all of which added additional lanes to be operated by Global-E."
Global-E also saw progress on its bottom line. The company remained unprofitable, posting a second-quarter net loss of $49 million, but its free cash flow improved dramatically, rising from $6.8 million to $30 million year over year.
Investors should look more closely at Global-E
After posting these strong results, Global-E's quarter would have been impressive without the Disney deal. And as a cherry on top, the company's U.S. outbound revenue -- revenue coming from U.S. merchants selling internationally -- jumped 104% during the quarter. Global-E now has a solid presence in the U.S. with 39% of revenue coming from that region.
In light of that momentum, Global-E stock is no bargain as of this writing. Even after its nearly 50% sell-off, shares trade at 17 times sales, a high valuation for any company.
However, I'm convinced it's worth buying this company at a premium. Global-E is seeing strong adoption, proving that its services are critical to an e-commerce business's international operations. Additionally, the company is demonstrating its leadership in the space by attracting large enterprises like Adidas and Disney.