2023 was an amazing year for growth stocks. The tech-heavy Nasdaq-100 index has gained 45% over the past year, more than double the S&P 500. One of the questions on investors' minds is whether 2024 will be a repeat. Global-e Online (GLBE 2.44%) is a typical tech-focused growth stock that gained 92% in 2023. Is it too late to buy?
The best e-commerce stock you've never heard of
You may not have heard of Global-e because it's a business-to-business platform providing cross-border solutions for e-commerce retailers. You might have used its platform without realizing it if you've ordered products from another country. It integrates into a client's website and offers services like localized checkout, currency options, instant customs calculations, and shipping options.
Global-e has various packages for different-sized companies, but it's known for working with A-list clients, like Walt Disney and LVMH. Some recent customers include Tory Burch and Bang & Olufsen, and LVMH consistently adds more of its owned brands to the platform, such as Repossi, Emilio Pucci, and Patou, in the 2023 third quarter.
As a business-to-business company, Global-e has demonstrated some resilience under pressure. Its clients still need its services, and many companies are looking for more ways to generate revenue.
However, after high-double-digit growth every quarter since it went public in 2021, there was a sharp deceleration in the third quarter of 2023. Sales increased 27% over last year to $134 million, and gross merchandise volume increased 35% to $839 million. That was below guidance, and management attributed it to macro headwinds, such as softening in the European luxury market.
Things are starting to change, though. Management said it's already seeing positive trends in consumer spending, and it expects its take rate to remain stable in the near term.
Longer term, shopping trends are in Global-e's favor. E-commerce is increasing as a percentage of overall retail and is expected to reach 23% by 2028. More companies will want to be a part of that growth story.
Important partnership with Shopify
E-commerce giant Shopify was an early investor in Global-e and remains a strong partner. All Shopify merchants have the ability to integrate Global-e into their websites, and Shopify recently used the Global-e platform to launch a new, white-label platform called Shopify Markets Pro. Global-e expects this to drive higher revenue in the coming quarters.
The Shopify partnership is also eating into profits right now. Total gross profit increased from $40.8 million to $56.5 million in the third quarter, and adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) increased from $12.5 million to $22.1 million. It's still posting a net loss, but that improved from $65 million last year to $33 million this year.
Part of what's affecting the bottom line is the amortization of warrants issued to Shopify at the initial public offering (IPO). This was $117.5 million in 2023 and will be the same in 2024 before tapering off to $34.5 million in 2025 to be fully amortized.
Between double-digit sales increases, easing headwinds, and improving gross profit and margin, Global-e is poised to scale successfully and become profitable, although it might take some time.
Can you still buy into this growth story?
Even with its gain last year, Global-e stock is still more than 50% off its highs. But at this price, shares trade at a rich price-to-sales ratio of 12. That's well below its average, though. Investors give it a premium valuation because its growth prospects are so strong.
Out of 14 Wall Street analysts that cover Global-e stock, 12 rate it a buy or better, and the other two put it on hold. Its story is far from over, and you can definitely still buy in today for years of potential gains.
