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1 Beautiful growth stock is down 63% to buy now before it skyrockets

Investors remain enamored with artificial intelligence (AI) stocks, which makes a lot of sense. AI has the power to transform business and everyday life, and many changes are already underway.

But AI isn’t the only game in town. E-commerce may be yesterday’s trend, but if you’ve moved on, you’ve left a huge opportunity on the table. E-commerce is still increasing as a percentage of total retail sales and is expected to reach 22.6% by 2027. Amazon And Shopify are reporting strong growth, and some international companies like that MercadoLibre grow even faster.

Global-e Online (NASDAQ:GLBE) is a business-to-business e-commerce specialist with a lot of momentum, and its shares are down 63% from highs. Let’s take a look at why it’s down and why it could skyrocket.

It’s a small world for Global-e

Global-e markets a cross-border e-commerce platform for retailers. It offers high-tech solutions that simplify global shipping and help customers generate higher sales. These include tools such as instant customs calculations, localized checkout and various shipping options. The platform can be easily embedded into a customer’s website and is a no-brainer addition for any e-commerce retailer looking to reach global markets.

It works with top global brands such as Walt Disney And Adidas, and it has a large pipeline of new labels joining consistently. In Q4 2023, it added EleVen by Venus Williams, Jean-Paul Gaultier and Warner Bros. Discovery‘s Harry Potter store in Britain, among many others.

It also has a partnership with e-commerce giant Shopify. Shopify was one of the original investors and still has warrants for Global-e shares that it can exercise until 2025. Shopify offers Global-e services to its millions of commercial customers and launched a white-label service called Shopify Markets Pro in September. .

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So far it’s off to a great start. Shopify gave two examples: Chicago-based suit company Suitshop, whose international sales have increased 600% since its founding, and New York-based skincare company Beekman 1802, whose international sales have increased 137% in six months.

Why have Global-e shares fallen?

Global-e has shown fantastic growth since going public in 2021. However, that growth has slowed in the inflationary environment. Revenue increased 33% year-over-year in the fourth quarter of 2023, and gross merchandise value (GMV) increased 42%. These figures reflect both organic revenue and new deals, and also include the 2022 acquisition of Borderfree.

Profitability figures are improving. Adjusted gross profit increased 37% year over year in the fourth quarter and gross margin increased from 41.3% to 42.7%. Adjusted earnings before interest, taxes, depreciation and amortization (EBITDA) rose 62% in the quarter. The net loss was still more than $22 million, but it was an improvement from the $28 million in the fourth quarter of 2023.

These large losses continue to weigh on investor sentiment. Investors want to see more progress here. Investors also consider overall global economic conditions and how they compare to Global-e and its near-term potential.

Global-e’s profitability is primarily influenced by three factors: its overall marketing and costs to grow its business, its ability to scale in a pressurized environment, and its Shopify warrants, which it amortizes and carries as part of his expenses. Because these do not expire until next year, management expects further losses in 2024.

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A huge opportunity in niche e-commerce

The good news is that these all appear to be short-term factors that impact an otherwise healthy and growing company. Although Global-e (barring any surprises) won’t report GAAP earnings this year, gross profit and adjusted EBITDA should continue to rise. These are the numbers investors should be looking at now.

Management indicates that GMV will increase 27% year over year and revenue will increase 21% in the first quarter of 2024, with both companies expected to grow 32% for the full year. It provided more detailed guidance on 2024 trends and expects the first half of the year to see pressure from the migration of Borderfree’s customer base to the Global-e platform. Borderfree’s customers are predominantly large, established companies with a strong physical retail presence Macy’s And Northstream. They comprise the majority of Borderfree’s GMV and are experiencing revenue declines.

Management expects sales to accelerate in the second half of the year as several major sellers are expected to appear on the platform. Borderfree customer migration will have a smaller impact on year-over-year comparisons, and a stronger boost is expected from a ramp-up of Shopify Markets Pro.

According to Statista, global e-commerce is expected to grow at a compound annual growth rate of 9.5% through 2029, and as it brings in more customers, Global-e will benefit from secular trends.

Global-e shares are trading at a price-to-sales ratio of 8.6, about the lowest ever. It’s still not exactly cheap, but it deserves a premium because of its high growth rates and long-term opportunity. The stock is down 25% this year and the average Wall Street price target is a gain of 45% with a high of 68%. Global-e reports first-quarter results on May 20, and investors can look forward to the latest update.

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Should you invest $1,000 in Global-E Online now?

Consider the following before purchasing shares in Global-E Online:

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John Mackey, former CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. Jennifer Saibil holds positions at Global-E Online, MercadoLibre and Walt Disney. The Motley Fool holds positions in and recommends Amazon, Global-E Online, MercadoLibre, Shopify, Walt Disney, and Warner Bros. Discovery on. The Motley Fool has a disclosure policy.

1 Beautiful Growth Stock Down 63% to Buy Now Before It Skyrockets was originally published by The Motley Fool

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