We know $300 isn't a king's ransom, but it could help set the stage for epic returns in the stock market if invested in the right companies over a long-enough time frame. And while most investors are used to betting on American companies, there are also some exciting opportunities abroad.
Let's explore why Israel-based Global-e Online (GLBE +4.95%) and China-based Luckin Coffee (LKNC.Y +3.57%) could be excellent bets for investors as they scale up their business models and move toward profitability.
Global-e Online
Global-e takes a unique spin on the e-commerce industry. Instead of retailing its own products, it helps other merchants operate internationally by handling the global side of their business. With the stock up by a whopping 78% year to date, the strategy has richly rewarded recent investors. At $38 per share, it still trades at a discount to its all-time high of almost $82, which it reached in 2021. But its booming growth rate and improving bottom line could help it bounce back.
Global-e Online's initial public offering (IPO) in mid-2021 might have put it in the right place at the wrong time. The pandemic-era online shopping boom was drawing to a close right as supply chain challenges and inflation began pressuring the industry. But while these challenges hurt Global-e's valuation (at its peak, shares traded for more than 50 times sales compared to 12 today), the company's fundamentals remain strong.
NASDAQ: GLBE
Key Data Points
Second-quarter sales jumped 53% to $825 million as more online retailers turned to Global-e to handle their international e-commerce fulfillment, customer support, and logistics. Management should be able to drive continued growth through efforts such as Shopify Markets Pro, a partnership with e-commerce giant Shopify to help its small-business clients expand their sales internationally.
Global-e expects adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) of $85 million to $93 million in full-year 2023 (up from $48.7 million in 2022). While this figure will likely add back significant non-cash outflows like stock-based compensation, it gives investors a sense of how the company's bottom line is scaling up.
Luckin Coffee
Like Global-e Online, Luckin Coffee has also performed well in the near term. Shares in the Chinese coffee chain have jumped 40% year to date as it expands its footprint in China and new Asian markets. And while some may remember Luckin for the high-profile fraud scandal that saw management fabricate $300 million in 2019 sales, it now has new leadership and a new governance strategy focused on effective checks and balances.
Its burgeoning profitability and reasonable valuation mean it isn't too late to bet on its long-term success. Second-quarter sales surged 88% to $855.2 million as Luckin opened 1,485 more locations to bring its total to 10,836. As the business grows, it benefits from economies of scale because overhead costs like administrative salaries and advertising are becoming a smaller percentage of revenue.
Management is also helping to vertically integrate the supply chain through a new $120 million bean processing and roasting facility in Jiangsu, Eastern China. The result is improving profitability.
Image source: Getty Images.
Quarterly net income jumped from a loss of 114,707 billion RMB (renminbi, or Chinese yuan) to 998,704 billion RMB ($137.7 million). And investors should expect that number to increase as the company continues to scale up.
With a price-to-sales (P/S) ratio of just 4.4, Luckin Coffee's stock is still reasonably valued considering its fast-growing top and bottom lines. While its rival, Starbucks, is technically cheaper with a market valuation of 2.9 times sales, the American company only grew sales by 12% in its most recent quarter, far behind Luckin's 88% expansion.
OTC: LKNC.Y
Key Data Points
Which stock is better for you?
Global-e Online and Luckin Coffee both enjoy impressive growth rates and improving bottom lines, but they might suit different investing priorities. From a value perspective, Luckin looks like the better deal. The Chinese stock has a lower valuation (shares trade at a P/S multiple of 4.4 compared to Global-e's P/S multiple of 12), a faster top-line growth rate, and profits according to generally accepted accounting principles (GAAP).
On the other hand, Global-e could appeal more to investors who are less comfortable investing in Luckin because of its history under prior leadership -- although personally, I find it unlikely for lighting to strike twice in this regard, considering the company's strengthened governance rules.
