Shares of Global-e Online (GLBE +1.31%) dipped slightly in response to a first-quarter earnings report that was a lot more positive than the price action suggests. The amount of merchandise being purchased through its cross-border platform soared through the roof in the first three months of 2022, but the stock hardly moved after management reported results on Monday, May 22.
NASDAQ: GLBE
Key Data Points
Is Global-e Online a good stock to buy now or should investors remain cautious? Let's look under the hood to gauge our chance of receiving market-beating gains from this stock.
Reasons to buy now
Global-e Online helps direct-to-consumer merchants reach customers across borders. Clearly, international merchants are clamoring for the service.
The gross value of merchandise (GMV) sold via its platform rose 55% year over year in Q1 to $704 million. The pace of growth has been impressive, and there's plenty of room to continue climbing. Worldwide retail e-commerce sales are expected to reach $5.9 trillion this year.
Revenue from Global-e Onilne's roster of U.S. merchants selling their goods abroad rose 100% in 2023's Q1, and it could soar much further. Global-e is collaborating with Shopify (SHOP +3.95%) on Shopify Markets Pro, a fully integrated merchant-of-record solution for selling goods across borders.
NASDAQ: SHOP
Key Data Points
The Shopify Markets Pro service should be widely available for U.S. customers this summer and for U.K. customers later this year. Global-e investors can count on Shopify holding up its end of the deal. Shopify owns around 13.5% of Global-e Online's outstanding shares.
In Q1, Global-e Online showed signs that it's achieving scale. Its Q1 gross profit grew 69% year over year, while total operating expenses climbed just 11% over the same time frame.
During its Q1 earnings call, Global-e Online said that macroeconomic conditions were more favorable than expected. Now, management expects 2023 total revenue to land in a range between $562 and $590 million. The midpoint of this range represents a 41% year-over-year growth rate.
Reasons to remain cautious
According to generally accepted accounting principles (GAAP), Global-e Online lost $43 million in the first three months of 2023. That's better than the $54 million loss it reported a year earlier, but the company is still a long way from generating a sustainable profit.
Right now, Global-e Online is trading for 70.4 times the midpoint of management's guidance range for adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) this year. This multiple is fair for a company growing its business by more than 40% annually, but investors should understand that this stock could fall hard if revenue growth starts to slow down before its bottom line turns positive on a GAAP basis.
A buy?
Global-e Online's sky-high valuation is troubling, but perhaps it shouldn't be. The rollout of Shopify Markets Pro across the U.S. and U.K. could drive heaps of sales growth over the next few years.
Given its sky-high valuation, though, cautious investors should keep an eye on Global-e Online for at least the next couple of quarterly reports. If its bottom line continues moving in a positive direction, it could be a buy. For now, though, any investor who isn't comfortable at the upper end of the risk-tolerance spectrum should watch this story play out from a safe distance.
