Props to you if you ignored what I said a few months ago and bought some shares of Global-e Online (GLBE -2.15%). The cross-border e-commerce software company, and key Shopify collaborator, is up big this year as it rallies from the nasty bear market of 2022. Shares are up 70% so far in 2023 as of this writing.
Global-e's surge seems to have some support thanks to another strong earnings report. But by some metrics, shares are starting to look a bit frothy. Is Global-e a buy now?
What has the market jazzed up?
Global-e provides software and logistics solutions for businesses that want to sell in countries other than their own. Services include enabling shoppers to see merchandise pricing listed in local currency, local payment option integrations and tax calculations, and localized shipping and returns. Besides working closely with Shopify, Meta Platforms (Facebook, Instagram, and WhatsApp) also taps Global-e for its small business cross-border sales solutions.
While e-commerce industry growth overall has slowed significantly the last two years, cross-border selling seems to be all the rage at the moment -- which is underlying the excitement about this e-commerce software provider.
Global-e easily exceeded its own guidance for the first quarter of 2023. Gross merchandise value (GMV, the value of goods sold on its platform) increased 55% from a year ago to $704 million, versus as much as $675 million forecasted. Revenue was up 54% to $118 million, versus $114 million forecasted.
With 2023 off to a great start and Global-e holding its own against a strong macroeconomic current of slowing consumer spending and possible recession, management felt a full-year upgrade was in order. GMV guidance was raised by about $30 million and is now expected to be at least $3.4 billion in 2023. Resulting expected revenue was increased a few million dollars and is now expected to be in a range of $562 million to as much as $590 million, implying full-year growth of about 41% over 2022.
Is it too late to buy?
There's one key reason I still can't bring myself to buy this stock now, and that's the revenue guidance. Implied 41% growth is great, but after coming off of 54% growth to kick off the year, it appears Global-e is headed for a very significant cooldown in the second half of 2023. Revenue growth would need to fall well below 40% in the next three quarters to drag the annual growth rate down to 41%, as management is predicting.
Global-e still has my attention, though, because it's managed to quickly build itself a profitable little enterprise. Diminutive size or not, free cash flow was $53 million over the last 12-month stretch. If Global-e can continue to expand, albeit at a more gradual pace going forward, this free cash flow should scale up nicely.
Still, with the market running up the price on Global-e, I'm not sure much consideration is being given to this gradual deceleration in financial results. Shares currently trade for 106 times trailing-12-month free cash flow. Without a more meaningful upgrade to management's full-year growth expectations, I think chasing this stock and buying now could be teeing up some short-term disappointment.
I've been wrong before on this company, so bear that in mind.
At any rate, I'm content owning a bit of Global-e by way of my holding in Shopify stock. As part of the native integration of Global-e into Shopify's platform, Shopify has been granted a sizable equity stake in Global-e. And with Shopify recently overhauling its business to double down on e-commerce software, I like owning it rather than buying a new stand-alone position in Global-e at this point.
