Are you ready for the next bull market? Counterintuitively, the best time to buy stocks is before they start. Global-e online (GLBE -0.87%) It is one of those stocks to consider now. It has all the makings of a high-growth company and its shares are already up 77% this year. But it could rise even higher in 2024 and presents a huge long-term opportunity. Let's see why.
Simple solutions, broad benefits
Global-e operates a cross-border solutions platform for e-commerce retailers. It makes it easy for retailers, large and small, to offer global shopping, expand their markets and generate more revenue. It has a long list of high-profile clients who have experienced incredible engagement after joining the platform, resulting in increased sales.
It cites numerous testimonials, such as a representative of the British luxury chain Harvey Nichols who says that working with Global-e "has led to a fantastic boost in our international conversion rates." LVMHThe Marc Jacobs-owned brand demonstrated a 77% increase in international e-commerce sales within three months of partnering with Global-e, and Sigma Sports' international revenue increased 192% after joining the platform.
The company also provides information as part of its packages. For example, it finds that 92% of Canadian buyers prefer to prepay customs charges and 77% of customers in China prefer local payment. You have tons of data from your numerous customers that demonstrate the benefits of offering all of these options, where different populations have different needs and habits. These insights help clients design the right cross-border solutions for their global clients.
The path to profitability
Global-e is a typical young, high-growth stock, with the required high growth and no earnings. Although its customers continue to use the platform, its own sales have been affected by inflation, and that carries over to Global-e. Because it works with many upscale retailers, unlike discounters, its customers are particularly hard hit as shoppers cut back on additional spending.
Revenue increased 27% year over year in the third quarter of 2023, a slowdown from previous periods. At the same time, however, profitability is improving. Like other business-to-business companies, it is more focused on making profits when growth is slower, and that puts it in a position to achieve profitability at scale.
Global-e has no long-term debt, and as revenue growth outpaces expense growth, margins are widening. Adjusted gross profit increased 36% over last year, while adjusted profit gross margin increased from 41.5% to 44.4%. Adjusted earnings before interest, taxes, depreciation and amortization (EBITDA) The margin was 16.5% in the third quarter, up from 11.9% last year. Net loss improved from $65 million to $35 million.
The open opportunity
Global-e continues to consistently add new clients, with recent additions including Tory Burch and Ted Baker. LVMH is a strong partner that continues to add more brands and markets, such as the fashion houses Repossi, Emilio Pucci and Patou in the third quarter.
One of the most interesting associations is with buy, which is an investor in Global-e and offers its services to its millions of merchants. Shopify introduced its global e-commerce suite, Shopify Markets Pro, to U.S. customers in September as a white-label platform using Global-e's technology. As part of its investment in Global-e, Shopify has exercisable warrants that are amortized by Global-e and expensed. This is $117 million in 2023 and 2024, and the remaining $34 million in 2025. This counts against Global-e's profitability in the short term.
Global-e also recently signed a partnership with Wix.com to provide packages for your e-commerce clients.
The next big e-commerce move
Global-e is still small, with $524 million in revenue over the past 12 months. Management sees the return of consumer and the launch of Shopify Markets Pro as growth drivers in the coming months and expects growth to accelerate.
Global-e stock is not cheap. It trades at a premium valuation of 11 times trailing 12-month sales, but that's well below its three-year average of 19.
GLBE PS Ratio data for Y Charts. PS = selling price.
The stock is trading at a high valuation because Global-e's business premise is very strong and investors expect a lot. Can you deliver? If a bull market hits in 2024, Global-e could skyrocket.
Jennifer Saibil has positions in Global-e Online. The Motley Fool posts and recommends Global-e Online, Shopify, and Wix.com. The Motley Fool has a disclosure policy.
