Summary
Global-e Online is a first mover in a rather large niche within e-commerce that is growing like wildfire and the company has no real substantial competitors.
In the third quarter, gross profit grew faster than revenue growth. The company’s gross margins expanded in Q3 to 38.6% up from 30.2% in Q3 of last year.
When Global-e acquired Flow Commerce, it gave Global-e Online the capability to provide services to small merchants that were previously not eligible.
There are really very few companies that do all of the things Global-e Online does in the D2C cross-border space and with the ones that do have similar capabilities, it seems that Global-e is not above acquiring them.
Aggressive growth investors with high risk tolerance should buy Global-e Online hand over first at current prices. Global-e Online is a high-growth company that looks set to continue increasing margins and bottom-line profitability over the next several years.
blackred/iStock via Getty Images Why Buy Global-e Online at Current Prices
Global-e Online (NASDAQ: GLBE ) is a first mover in a rather large niche within e-commerce that is growing like wildfire and the company has no real substantial competitors. Global-e Online facilitates D2C or the direct-to-consumer cross-border e-commerce, which is an immense market that is directly fueled by Millennial spend and is growing significantly faster than the overall e-commerce market. Global-e Online is riding that market and is also exhibiting rapid growth, despite COVID-19 recovery headwinds. Secondarily, while the company was unprofitable on a GAAP basis in Q3, it is expected to show rising bottom-line profitability moving forward. Global-e has also shown significant gross margin expansion lately, which the company attributes to growing economies of scale and increased efficiencies.
Another thing to consider is that Global-e Online recently had its lock-up period expire in early November, which might at least partially account for the valuation drop off in September, as investors anticipated the lock-up period expiring. So, the worries about what will happen when the lock-up period ends have been taken out of the stock evaluation.
Last but not least, while the company might be considered expensive on both an absolute basis and on a relative basis compared to other e-commerce companies, when considering that the company has a greenfield opportunity with very high potential upside and little competition, I believe the company is currently selling at a “Buy Now” valuation for aggressive investors with a time horizon of three to five years. Metrics That Support the Bull View
Let’s look at a few of the metrics that support the company’s current valuation.
Global-e Online’s Q3 2021 Gross Merchandise Value (GMV) grew 86% year-on-year to $352 million. I like looking at GMV for online marketplaces because generally this metric determines the overall health of the business. What we want to see here is a rapidly expanding GMV as the faster the GMV growth is, the healthier the growth.
Currently, Global-e is encountering strong headwinds due to the fact that COVID-19 vaccines and treatments such as Pfizer’s (NYSE: PFE ) new pill are becoming widely available, which is slowly helping to wind down the worst of the pandemic. What this means for Global-e is that they are now encountering the reopening of physical retail, which is now competing more strongly for the consumer spend that was forced online in 2020. The record levels of e-commerce market share that occurred in 2020 have declined throughout 2021, which has resulted in growth headwinds for Global-e and those headwinds can be seen in a deceleration from triple-digit revenue growth earlier in the year to 77.40% year-over-year revenue growth in Q3 2021. Data by YCharts However, the good news is that gross profit grew even faster than revenue growth. Global-e gross profit grew 127 % year-on-year, resulting in a rapidly expanding gross margin. Global-e’s gross margins expanded in Q3 to 38.6%, up from 30.2% in Q3 of last year. Data by YCharts Goldman Sachs (NYSE: GS ) analyst Will Nance has taken notice of the rapid gross profit growth and initiated the stock with a buy with the following commentary: The company’s profitability is a result of its “differentiated product offerings levered to the growth in cross-border e-commerce, in addition to its partnership with SHOP, which we believe can add as much as 42% to gross profit by 2023.” The improving profitability numbers have also dropped down to the bottom line with Adjusted EBITDA almost tripling year-over-year to $7.7 million. The company attributed these results to the company’s “highly efficient operating model”.
Operating cash flow […]
source Global-e Online: Buy This High-Flying E-Commerce Company
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