E-commerce has been languishing in the last year. After a boom in online shopping activity early in the pandemic, brick-and-mortar stores are making a comeback. Many e-commerce stocks have been in the doldrums as a result.
Global-e Online (GLBE 2.44%) is bucking the trend, though, putting up blistering growth to close out 2022 and forecasting another record year for 2023. Watch this top digital commerce company closely in the year ahead.
An emerging e-commerce leader making great financial strides
As with many new software-based companies, the bear market was especially brutal to Global-e. The stock is down some 65% from all-time highs reached in 2021 not long after its IPO. But Global-e shares have been showing signs of life again, rising nearly 50% since December.
Its final quarter of 2022 justifies the rebound, at least in part. Global-e's gross merchandise value, or GMV (the value of merchandise sold using its services) rose 66% year over year to $839 million. Resulting revenue was up 69% to $140 million in fourth-quarter 2022, bolstered by new customers seeking to expand their cross-border commerce capabilities -- especially in the white-hot luxury goods industry. Existing partnerships, especially Global-e's integration with Shopify (SHOP 1.11%) to help small merchants sell to customers in countries other than their own, also contributed to the fast expansion this past year.
The outlook for 2023 was pretty good too. GMV and revenue of at least $645 million and $108 million, respectively, in the first quarter implies year-over-year growth of at least 42%. For full-year 2023, management expects revenue to be at least $557 million, which would be a 36% increase from 2022.
Most impressive, though, is that Global-e has been able to keep tight control over its expenses in the last year. Free cash flow has been off to the races lately as the company reaches a more efficient operating scale with every new customer and existing-customer expansion it signs on.
Data by YCharts.
Time to buy Global-e stock?
Of course, on a GAAP basis, Global-e isn't profitable yet. The amortization of a commercial agreement asset (a non-cash expense, resulting from warrants to buy Global-e stock issued to Shopify when the integration between the two companies was struck in 2021) is a big reason why. Amortization related to the issuance of equity to Shopify was a $149 million drag on GAAP net income in 2022. (Up until this point, I've been content to have some Global-e stock via my Shopify position.)
Stock-based compensation to employees is another touchy subject these days. Global-e shelled out $38.9 million in 2022. Nevertheless, with free cash flow fast on the rise, the company is off to a great start in its very short history growing cash profits on a per-share basis.
GLBE Free Cash Flow Per Share data by YCharts
One other area of concern I'm keeping an eye on: The balance sheet's cash has been depleted this past year due to two acquisitions. The first was the purchase of cross-border commerce peer Flow Commerce in January 2022 (about $500 million), followed up by the purchase of Pitney Bowes' (PBI -2.13%) small cross-border service in July 2022 ($100 million, and which also resulted in a partnership for Global-e to use Pitney Bowes' global logistics services).
At the end of 2022, Global-e had just $165 million in cash and short-term investments, $46.4 million in short-term deposits, and no debt on its balance sheet. The positive free cash flow generation will replenish the coffers, but it will take time. In the meantime, shares trade for 61 times trailing 12-month free cash flow, and profit margins are improving. I expect the company to reach GAAP profitability within the next three years, and free cash flow is expected to keep running higher as revenue increases.
Global-e has upset my expectations for global e-commerce expansion in the last year, so I'm taking another look at this stock. I'm not a buyer just yet, but this cross-border e-commerce software company is on my watch list.
