All it takes is one incredible growth stock to boost your portfolio. If you find that high-growth stock, it can make up for, and even lose, other mediocre stocks. That’s one of the reasons why a diversified portfolio is important. No one knows what the future will bring, and you want your eggs spread in different baskets.
Global-e Online (NASDAQ:GLBE) is a fast-growing stock trading close to its lowest valuation ever, and growth investors should consider buying it at these prices.
The best e-commerce stock you’ve never heard of
Global-e markets a business-to-business platform that enables e-commerce retailers to trade cross-border. Users plug it into their websites and it gives them the ability to offer a large selection of international services on their checkout pages, from localized currencies to instant customs calculations and varied shipping options.
These are the types of services every retailer needs to start shipping internationally, and Global-e makes it easy. Not surprisingly, it regularly adds new, high-profile customers, or shows phenomenal growth.
Gross merchandise volume (GMV) increased 32% year-over-year in the first quarter of 2024, and revenue increased 24%. The company added Heydude in the quarter Crocs and Donna Karan in the US, as well as luggage brand Antler and SoHo Home in the UK, among others. It also expanded many partnerships, such as adding new regions Adidas and new brands for Coty.
Global-e has a partnership with e-commerce giant Shopify, which recently launched a white-label cross-border solution for its merchants called Shopify Market Pro. It also recently signed a deal with Wix.com to offer its services on Wix’s e-commerce sites.
Management indicates that growth will accelerate in the second half of the year, with some planned major partnerships launching and momentum building in the Shopify Market Pro business. Global-e said it has dozens of brands live, as well as a strong pipeline of new customers. The company raised its full-year guidance for revenue, GMV and adjusted earnings before interest, taxes, depreciation and amortization (EBITDA) after reporting first-quarter earnings results.
But it’s the long-term prospects that look most attractive. Global-e is still a young company and could really take off if the economy improves. E-commerce continues to grow in importance and as a percentage of total retail sales, and as we transition to a global economy, Global-e’s services will become even more in demand.
Putting the risks on the table
The biggest risk for Global-e right now is that it is not profitable, although profitability figures have improved. Gross profit rose 38% year over year, outpacing revenue growth, and gross margin increased from 41.2% to 43.4%. Adjusted EBITDA improved from $14.5 million to $21.3 million, and net loss decreased from $43.1 million to $32.1 million.
Those are solid improvements, but they’re still far from Generally Accepted Accounting Principles (GAAP) profitability. Part of Global-e’s partnership with Shopify includes warrants for Shopify to purchase shares of Global-e that Global-e has written off as expenses. These currently take up part of the total and will not be fully written off until 2025.
Although management is guiding for accelerated growth in the second half of the year, the company could still be negatively affected by persistent inflation and the possibility of a recession. Many of its clients are focused on luxury customers, which provides some resilience. But any business that deals in retail is susceptible to these risks when there is economic volatility.
To me, the growth story seems much more compelling than the risks at the moment.
A price too cheap to ignore
Global-e is growing and becoming more profitable, but Global-e shares are near their lowest price-to-sales ratio ever.
It may be far-fetched to call a price-to-sales ratio of 8 objectively cheap, but Global-e is a fast-growing stock with a lot of future potential, which is why the stock commands a premium. This is a great opportunity to acquire shares and profit as Global-e shares continue to rise.
Should you invest $1,000 in Global-E Online now?
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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. The Motley Fool holds positions in and recommends Amazon, Apple, Global-E Online, Shopify and Wix.com. The Motley Fool recommends Crocs. The Motley Fool has a disclosure policy.
1 Unstoppable Growth Stock Trades at a Price You May Never See Again was originally published by The Motley Fool
