With high inflation and the Federal Reserve's interest rate hikes spooking the market, 2022 hasn't been the best year for growth stocks. That said, the bear market has created plenty of chances for investors to pick up shares of top-quality companies at a discount. Let's discuss why Global E Online (GLBE 2.57%) and Luckin Coffee (LKNC.Y -1.43%) could help turbocharge your investment portfolio.
Global E Online
Down by 68% year to date, Global E Online hasn't escaped the impacts of the 2022 bear market, which hit the tech sector particularly hard. Like many e-commerce companies, it now faces post-COVID investor pessimism. But that shouldn't overshadow its rapid growth rate and strengthening economic moat in the industry.
Global E operates a platform designed to facilitate cross-border digital sales and fulfillment. It helps companies sell their goods in foreign markets by providing services like regulatory compliance, import compliance, and currency conversion. There has proven to be a big market for these services. In the third quarter, Global E's sales increased by 79% to $105.6 billion as it onboarded new clients such as Rag & Bone, The Wimbledon Online Shop, and Zenith, a luxury watch brand owned by LVMH Group.
Global E Online is an exciting investment because it occupies a unique niche in e-commerce that's quite distinct from the ones occupied by more familiar players like Amazon. As more clients start using Global E's services, the company should begin to enjoy economies of scale, which could become a competitive advantage.
Trading at a price-to-sales multiple of 9.4, the stock commands a healthy premium relative to the S&P 500's average multiple of 2.3. But this looks fair considering its rapid growth rate and unique niche.
Luckin Coffee
With its shares up 148% year to date, Luckin Coffee has trounced the S&P 500, which is down by 20% in the same time frame. Despite the massive rally, shares in the Chinese coffee shop still look appealing, considering its breakneck growth rate and the relaxation of China's controversial zero-COVID policy.
The company is seeking to reinvent itself after its previous management's frauds were exposed in 2019. In that effort, Luckin Coffee has emerged from bankruptcy and reworked its business model to focus on franchise stores and profitable growth. So far, the strategy is making a splash. In the third quarter, its revenue jumped 66% year over year to $547.5 million, helped in part by partnership stores (franchises), which saw their total sales more than double to $126.4 million.
Image source: Getty Images.
While the company's price-to-sales multiple of 4.4 is higher than that of rival Starbucks (which trades for 3.5 times sales), the premium looks reasonable based on Luckin's growth rate and the regulatory tailwinds in China.
In November, Luckin's management estimated that China's COVID-related lockdowns had forced the closure of around 500 of its 7,846 locations on any given day of the month. But now that the Chinese government is relaxing its zero-COVID policy, investors should expect this headwind to fade.
Investing during a bear market?
This is obviously a challenging time to invest in stocks considering the still-uncertain impacts of inflation, interest rate hikes, macroeconomic conditions, and geopolitical turbulence. But if history is anything to go by, these challenges will eventually pass. Over the long term, Global E Online and Luckin Coffee look poised for sustainable success because of their substantial market opportunities and burgeoning economic moats.
