All it takes is one incredible growth stock to supercharge your portfolio. If you find that high-growth stock, it can make up for other mediocre ones, and even losses. That’s one of the reasons a diversified portfolio is important. No one knows what the future will bring, and you want your eggs spread out in different baskets.
Global-e Online (NASDAQ: GLBE) is a high-growth stock that’s trading close to its lowest-ever valuation, and growth investors should consider buying it at these prices.
The best e-commerce stock you haven’t heard of
Global-e markets a business-to-business platform for e-commerce retailers to engage in cross-border commerce. 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 kinds of services every retailer needs to begin shipping internationally, and Global-e makes it easy. It’s not surprising that it adds new, high-profile clients on a regular basis, or that it’s been demonstrating phenomenal growth.
Gross merchandise volume (GMV) increased 32% year over year in the 2024 first quarter, and revenue was up 24%. In the quarter the company added Heydude by Crocs and Donna Karan in the U.S., as well as luggage brand Antler and SoHo Home in the U.K., in addition to others. It also expanded many partnerships, such as adding new regions for 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 provide its services on Wix’s e-commerce sites.
Management is guiding for growth to accelerate in the second half of the year, with some planned large partnerships launching and momentum building in the Shopify Market Pro business. Global-e said that it has dozens of brands going live, as well as a strong pipeline of new clients. The company raised its outlook for revenue, GMV, and adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) for the full year after the first-quarter earnings release.
But it’s the long-term outlook that looks most compelling. Global-e is still a young company, and could really take off when the economy improves. E-commerce continues to grow in importance and as a percentage of overall retail sales, and as we shift into a global economy, Global-e’s services will become even more in demand.
Putting the risks on the table
The main risk for Global-e right now is that it’s not profitable, although profitability metrics have been improving. Gross profit increased 38% year over year, outpacing revenue growth, and gross margin expanded from 41.2% to 43.4%. Adjusted EBITDA improved from $14.5 million to $21.3 million, and net loss contracted from $43.1 million to $32.1 million.
Those are solid improvements, but they’re still a ways off from generally accepted accounting principles (GAAP) profitability. Part of Global-e’s partnership with Shopify includes warrants for Shopify to buy Global-e stock that Global-e amortized as expenses. These are taking a chunk out of the total right now, and they won’t be fully amortized until 2025.
Although management is guiding for accelerated growth in the second half of the year, the company could still be negatively impacted by continued inflation and the potential for a recession. Many of its clients target upscale customers, which provides some resilience. But any company that deals in retail is susceptible to these risks when there’s economic volatility.
To me at least, the growth story looks much more compelling than the risks right now.
A price too cheap to ignore
Global-e is growing and becoming more profitable, but Global-e stock is training near its lowest-ever price-to-sales ratio.
It might be farfetched to call a price-to-sales ratio of 8 objectively cheap, but Global-e is a high-growth stock with tons of future potential, which is why its stock demands a premium. This is a great opportunity to scoop up shares and benefit as Global-e stock keeps on climbing.
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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 has positions in Global-E Online. The Motley Fool has 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.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.