This year hasn't been fun for growth stock investors, many of whom have seen their portfolios drop by double digits in 2022. But with the Nasdaq Composite down 28% year to date, now might be a great time to shop for deals in a beaten-down market. Let's explore why Global-e Online (GLBE -0.85%) and Farfetch (FTCH) could make top buys.
1. Global-e Online
Founded in 2013 and going public in 2021, Global-e Online is an e-commerce infrastructure platform designed to enable and accelerate cross-border digital sales and fulfillment. Its unique business model and massive market opportunity position it for long-term success.
According to data aggregation site Statista, the global e-commerce market is expected to expand at a compound annual growth rate (CAGR) of 12.24% to $6.43 trillion by 2027. While most of this growth will be dominated by third-party marketplaces such as Amazon, lesser-known companies like Global-e will also benefit by breaking down the geographic barriers between specific markets.
Global-e helps e-commerce merchants sell goods in other countries through services that include currency conversions, regulation compliance, and import processing. It can also handle customer service and returns to try to make selling internationally as simple as selling domestically -- a potentially massive value proposition for its clients. And business is booming.
Global-e's third-quarter revenue jumped 79% to $105.6 million, and its operating loss narrowed from $53.2 million to $28 million. While the company isn't profitable yet, its rapidly scaling business and valuable niche mean it could just be a matter of time before it rewards patient investors.
2. Farfetch
Farfetch is an e-commerce platform focusing on luxury fashion, a fast-growing market that often has high margins and strong brand loyalty. While the company faces near-term headwinds like inflation and currency volatility, its growing economic moat should aid its recovery.
Instead of operating a clothing boutique that buys and sells clothing inventory, Farfetch acts as a third-party marketplace. Its strategy involves working with brands and boutiques to distribute their products seamlessly on its website in return for a fee.
Like Global-e Online, it streamlines the international sales process for its partnered stores, which can dramatically expand their market reach without the brand dilution that could come from retailing on a less exclusive platform.
Image source: Getty Images.
Farfetch is boosting its economic moat through the partial acquisition of rival Yoox (which operates a similar business model). This move should help consolidate competition and boost Farfetch's network effect, the value a platform gains the more people use it.
Third-quarter earnings increased by just 1.9% year over year to $593.4 million, which is low. But Farfetch's international footprint makes it vulnerable to currency fluctuations, especially when the U.S. dollar is strengthening. Sales grew by 14% on a constant currency basis, which takes this factor into account. And while the company continues to face pressure from near-term macroeconomic challenges, it could make an excellent way for patient investors to bet on a long-term economic rebound.
Investing in a bear market
With the global economy possibly going into a recession in 2023, investors might need to be patient while waiting for their investments to reach their full potential. That said, Global-e Online and Farfetch both offer a chance to tap into the long-term opportunity in international e-commerce, and they might not stay down for long.
