Ask 20 investors about the potential of e-commerce and you'll likely get 20 different answers. Some will sing the praises of Amazon, while others will extol the virtues of Shopify (SHOP 1.25%). To be clear, both companies will undoubtedly be major players in the ongoing evolution of digital retail. But the next phase of online sales will entail the movement of goods across borders, which until recently was labor intensive and costly.

The average entrepreneur knows little about the intricacies of global selling. That's where Global-e Online (GLBE 2.57%) comes in. While it may not be a household name, the company is indispensable for e-commerce vendors with global aspirations, removing the complications that are necessarily a part of international online sales. The company's mission is "Making global e-commerce border agnostic." 

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A vast opportunity -- and a potential minefield

International online retail represents a vast, untapped opportunity for many entrepreneurs. While estimates vary, global e-commerce sales crested $5.2 trillion in 2021 and are expected to grow to $8.1 trillion by 2026, according to eMarketer. Merchants that can seamlessly sell their products across borders will exponentially increase their potential market opportunity.

For the average merchant, though, e-commerce is complicated enough. Setting up a website, accepting various payment methods, and arranging timely shipping is a full-time job. The task becomes an order of magnitude more complicated when selling products across international borders.

Customers want a smooth shopping experience, tailored to their needs. For global sellers, this involves communicating with customers in their own languages, pricing in local currencies, handling currency exchanges, and processing native payment methods.

But that's just the beginning. Merchants also need to manage national regulatory compliance, local import and export rules, and customs and duties.  

Global-e Online handles all that and more, helping merchants expand into new and potentially lucrative markets.

A major mentor and benefactor

As a worldwide leader in software-as-a-service (SaaS) tools for online merchants, Shopify was quick to recognize the value of Global-e's services, forging a strategic partnership with the company and making it the exclusive provider of cross-border services for its 1.7 million merchants. This gives Global-e Online ready access to a target market of vendors looking to make international sales.

Shopify went one big step further. The company took a 6.5% stake worth $193 million in Global-e prior to its initial public offering (IPO) in mid-2021. That has grown, and Shopify now owns more than 17.4 million shares of Global-E Online stock, a 10.2% stake worth about $366 million. 

The good, the bad, and the ugly

Global-e Online represents a compelling opportunity for investors, but it does come with a certain amount of risk.

In the third quarter, the company grew rapidly, generating revenue of $105.6 million, up 79% year over year. This was driven by an upsurge of products moving across borders as gross merchandise volume (GMV) grew 77% to $621 million. Adjusted gross profit nearly doubled to $43.8 million, while adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) increased 62% to $12.5 million. 

But the news wasn't all good. Global-e still reported a net loss of $64.6 million, and the company reverted to burning cash this year after generating positive cash flow in each of the past two years.

The integration of Borderfree, the cross-border e-commerce solutions business that Global-e acquired from Pitney Bowes last quarter, weighed on its results, as did macroeconomic headwinds.

On the bright side, both of those factors will abate over time, which should result in smoother sailing for Global-e.

The big picture

Contrary to the bearish market sentiment, e-commerce is only taking a breather before its next leg higher. 

Global-E Online generated $352 million of revenue on $2.1 billion of GMV in the past 12 months, which pales in comparison to its significant opportunity. The global cross-border business-to-consumer (B2C) market clocked in at $764 billion in 2021 and is expected to grow at a compound annual rate of 26.2%, topping $6.2 trillion by 2030. This provides Global-e Online with a significant total addressable market powered by secular tailwinds to fuel its rise.

Lastly, Global-e Online represents a compelling opportunity, but it comes at a cost. The stock is currently selling for 5.7 times next year's sales, when a reasonable price-to-sales ratio is typically between 1 and 2. 

That said, Global-e's history of robust growth, its massive addressable market, and a captive audience of Shopify merchants give the company a better-than-average chance of long-term success. For investors with the investing time horizon and patience to let the story play out, Global-e Online has all the makings of the next e-commerce powerhouse.