We face an uncertain economy with some Federal Reserve officials predicting a mild recession this year. That said, the bear market in 2022 may have already priced in many of these risks. Further, inflation continues to fall, and interest rates could eventually follow -- opening the door for future recovery.
Let's discuss why Amazon (AMZN -1.64%) and Global-E Online (GLBE -1.18%) could be great ways to bet on a rebound.
1. Amazon
While Amazon has recovered some value in 2023, its shares are still down by a whopping 41% from an all-time high of $186 reached in mid-2021. Since then, the company has dealt with a post-pandemic slump in stay-at-home shopping and faced macroeconomic challenges like inflation. But aggressive cost-cutting and pivots to new opportunities like artificial intelligence (AI) could help the company exceed previous levels.
The first thing Amazon is doing to get back on track is cutting costs. Under the leadership of former CEO Jeff Bezos, the company wildly overexpanded to meet elevated pandemic-era demand that didn't continue as expected after the crisis. To fix this, the company's new leader, Andy Jassey, has scaled back investments in Amazon's logistics network and reduced workforce inefficiencies by axing a whopping 27,000 white-collar positions. So far, the efforts seem to be paying off.
First-quarter operating income jumped 30% to $4.77 billion, mainly from improvements in North American e-commerce. Amazon's streamlined business will be a lasting benefit, even as macroeconomic pressures ease.
Amazon also doesn't intend to miss the AI gold rush. But instead of making its own chatbot to compete with the likes of OpenAI's ChatGPT, the tech giant is taking a picks-and-shovels approach to opportunity. In April, Amazon launched Bedrock, a service designed to help other companies create their own AI platforms by providing access to customizable language models. Bedrock and other AI solutions will be available to Amazon Web Services customers, helping boost growth and protect market share for this key segment.
Image source: Getty Images.
Global E Online
Hitting public markets through an initial public offering (IPO) in mid-2021, Global-E came just in time for the Nasdaq's bear market, which has it trading at a 62% discount to an all-time high of $82. But the stock's underperformance doesn't reflect the underlying business. GlobalE is still growing like crazy, and its unique niche could create sustainable value.
Global-E aims to help e-commerce companies grow their businesses by expanding sales overseas. It does that by offering a suite of tools and services, including website translation, customs compliance, and cross-border returns. By focusing on business clients, Global-E is somewhat shielded from fluctuations in the consumer market, which helps explain its breakneck growth rate despite the challenging economy.
In the fourth quarter, sales jumped 66% to $839 million as Global-E onboarded new clients, particularly in the luxury fashion space. The company is enjoying its fastest growth in the Asia Pacific and the Middle East, where outbound sales surged eightfold.
While Global E isn't profitable under generally accepted accounting principles, management expects adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) of $66 million to $74 million in2023. While this number adds back important non-cash charges like stock-based compensation, it does give investors a sense of the company's cash flow.
Which stock is best for you?
Usually, investors must make a trade-off between safety and growth potential, with larger, more established companies like Amazon typically having less risk because of their scale and capitalization. But while smaller, unprofitable companies like Global-E tend to be riskier, they make up for it by offering an opportunity for spectacular long-term returns.
