E-commerce took a bit of a backslide after soaring at the beginning of the pandemic. The sector is contending with physical store re-openings, excess inventory and infrastructure, and tough comparable sales to beat. Costco Wholesale and Target both reported year-over-year decreases in e-commerce sales in their most recent quarterly reports, and many smaller e-commerce companies are in the same boat.
Amazon, the indomitable king of e-commerce, has been struggling with too much infrastructure, slowing sales growth, and high pandemic-fueled growth that's harder to build on now. It's making strides in becoming more efficient, and I still see a huge growth runway ahead.
But there's one e-commerce stock I like even better than Amazon.
A niche e-commerce platform
Global-e Online (GLBE 0.86%) isn't an e-commerce retailer like the other companies I mentioned. It operates a business-to-business platform offering cross-border solutions for online retailers. These include basic functions like localized checkout, customs calculations, and a variety of shipping options, but they also include higher-level services like research and marketing tools and risk management. It offers several plans to fit both small outfits and large enterprise customers.
Its client list reads like a who's who of high-profile retailers, with large companies such as Walt Disney and Adidas and upscale labels such as Hugo Boss and Marc Jacobs. It services more mass-merchandise names like Macy's and Nordstrom through its acquisition of competitor Borderfree, and it adds new clients all the time.
It has a partnership with Shopify, which was an early investor in the company, and it's available to Shopify's merchants.
A classic growth stock
Global-e has been demonstrating high double-digit growth since it went public two years ago. In the 2023 first quarter, revenue increased 54% over last year to $117.6 million.
However, growth has come with huge expenses, and Global-e continues to post losses as it develops its business. Profitability has been improving, though. Gross profit increased 69% over last year, and gross margin expanded from 35.6% to 39%. Adjusted earnings before interest, taxes, depreciation and amortization (EBITDA) increased from $3.3 million last year to $14.5 million this year. Both revenue and adjusted EBITDA came in ahead of guidance, and management raised the full-year guidance for revenue, gross merchandise volume, and adjusted EBITDA.
The company's net loss was still high at $43 million, but a bit improved from $54 million last year. Part of the net loss is due to the investment from Shopify, which came with warrants for Shopify to buy its stock. These warrants have been amortized on Global-e's income statement, and come off as expenses. They will be fully amortized by 2025, which should take a big chunk out of expenses. It's also been saddled with stock-based compensation since it went public, and that should ease going forward as well.
Huge growth opportunities
Many e-commerce companies are watching their sales growth decelerate or their sales decline from previous-year levels. In this environment, it's logical that retailers would target new and international markets. Global-e opens up new avenues of growth. However, since sales are suppressed, it's also logical that Global-e's sales will increase at even higher rates when the economy is stronger, since it takes a fee from each sale.
In addition to bringing on new clients, it has growth opportunities in expanding its existing partnerships. In the first quarter, the company added new brands owned by its client LVMH. Disney Europe added capabilities for the U.K., and Bulgari added 30 new markets.
It's also still upgrading its Shopify integration and adding more features.
NASDAQ: GLBE
Key Data Points
This stock is heading higher
Global-e stock is up 80% so far in 2023, and it's getting more expensive. Shares trade at a price-to-sales ratio of more than 13, which isn't cheap for any stock. However, it was pushing 50 at the height of the bull market, so this a lot more reasonable. Investors are pricing it this way because of its incredible future opportunity. Global-e has a long growth runway, and even at this price it looks like a great stock to buy.
