The cross-border e-commerce solutions provider, Global-e Online (GLBE) has been bearish since the second half of 2021, continuing its downfall in 2022 to a decline of nearly 70% year to date. The latest blow to the stock came after its latest earnings which despite a beat on revenue had the 2022 outlook slashed due to the ongoing geopolitical instability and war on Ukraine. Consequently, the stock fell to new lows of $13.80 a share in the after-hours on May 16, plunging by a huge 28.05%. This decline followed a downtrend of 6.26% in the prior session which had the stock trading at $19.18 per share. Consequently, GLBE stock prices plummeted 26.28% to $14.14 in pre-market trading on May 17.
Although the latest earnings brought about the fear for its near-term growth, there are many factors that warrant a nice growth in the long term. With its price target of $89 from Goldman Sachs and presence in Cathie Wood’s latest portfolio, amid its continued YOY growth and expansion in the vastly growing market, the company is poised for much growth in the longer run.
Q1 2022 Earnings Highlights of GLBE
The company’s Q1 2022 sales grew by a nice 65.4% YOY to $76.32 million which beat the consensus estimate of $74.98 million. This includes services revenue of $31.9 million and fulfillment services revenue of $44.4 million for the quarter.
Moreover, the GMV shot up by 71% YOY to $455 million while it saw an increase of 66% in the previous quarter (Q4 2021). The non-GAAP gross profit surged by 94% YOY and gross margin by 580 basis points. Thus, the gross profit was $29.9 million while the gross margin stood at 39.1% in Q1 2022.
On the other hand, the adjusted EBITDA declined to $3.3 million against the comparable $5.2 million and the net loss widened to $53.6 million. Therefore, the resulting loss per share in the March quarter was $0.35 while it was $0.08 per share last year. While the net cash used in operating activities narrowed, Q1 2022 brought an operating loss of $51.58 million to GLBE from a profit of $4.11 million a year earlier.
Owing to the uncertainties and instability in the wider market due to the geopolitical situation as the war on Ukraine continues, GLBE provided a rather bleak outlook for Q2 and slashed the full-year guidance.
For the ongoing quarter, the company expects revenue of $82.5-$84.5 million while analysts are expecting $90.26 million. Moreover, the GMV is anticipated to be $495-$505 million, and adjusted EBITDA between $2.8 and $3.8 million.
For the full year, the revised guidance brought down revenue from $411-$421 million to $383-$403 million against the consensus of $412.79 million. The 2022 GMV is expected to be $2.28-$2.49 billion while adjusted EBITDA is anticipated to be $38-$42 million for 2022.
There are Certain Risks
The continued downfall of GLBE since last year can be attributed to the overall downtrend of the Nasdaq Composite index since its all-time-highs in November 2021 while the small-cap stocks like GLBE suffer wider volatility. Furthermore, the company’s previous valuation of 50 times sales at its peak was also a reason that it shrunk to a more realistic 15 times sales.
The Russian invasion of Ukraine has also been a major factor and continues to cause numerous headwinds. In 2021, the company’s 23% revenue came from European Union which has now been impacted by the war and will continue to do so as no end is so far seeable for the invasion. If the war continues, Europe will most likely take a hit and economic activity will degrade thus, in turn hurting the company. The company’s recent guidance slash down also comes from the Russia-Ukraine conflict and its impacts on the wider economy.
With peaking inflation and rising interest rates amid the geopolitical turmoil, the threat of a recession is becoming real by the day. Equities and crypto alike have been plunging down. This could mean a further continued downfall of GLBE in the near term as the economic and geopolitical instability further escalates.
But there is much Scope for Growth in the Long-term
Risks are inevitable, but there are many reasons that warrant the long-term growth of GLBE. After having started its business to help clients in the UK sell globally, the company has now expanded to the U.S., Europe, and Asia with new regions and verticals added continuously. Its levers for pulling growth expansion include its partnerships; the latest with Shopify which will bring its 2 million merchants to GLBE. The company also has a partnership with Meta Platforms for providing cross-border e-commerce solutions for Facebook’s merchants. Top companies like Cartier, Stussy, Sennheiser, McClaren Formula-1 team, Figs, and many others have also been deepening their relationship with the global e-commerce solutions provider.
Another top feature comes from its client and customer retention amid its continued expansion efforts. The company has continued developing new features and services to help customers with their cross-border e-commerce business which has helped it retain customers and increase their spending while fueling its growth engine. Additionally, the company has partnerships with over 20 shipping providers, experience in more than 25 languages, and 150 payment methods in 100 currencies to ease the troubles of cross-border e-commerce companies.
According to Forrester Research, the cross-border e-commerce market is expected to reach $736 billion by 2023. With a huge market opportunity like this and growing demand for its services amid its continued expansion and growth, GLBE even if down currently has a bullish outlook for the long term. Ratings from top analysts and its presence in hedge funds further suggest the claim of its continued growth despite the current tailwinds due to the geopolitical and economic situation.