Shopify is one of the hottest stocks on Wall Street, and if you're lucky enough to consider buying it when it goes public, your investment would increase in value by almost 3,000% today.
There may be many more to come. But Shopify's market cap is over $100 billion, and there are now younger companies that may have more growth opportunities. If you missed out on Shopify's early profits, consider purchasing global e-online (GLBE -3.07%) Inventory instead. Here's why:
Global-e is just getting started
Global-e operates a platform that provides global cross-border solutions for e-commerce retailers. Because the company is a business-to-business company, you will rarely see the Global-e name when using its services. However, if you order items from another country and see checkout in different currencies, instant customs information, and shipping options, you may be using Global-e.
Global-e has a long list of prominent clients and is constantly adding new deals.We have long-term relationships with global fashion conglomerates LVMHAnd we are continually expanding this partnership with fashion houses in new markets. New customers were added in the fourth quarter of 2023, including Jean-Paul Gaultier, Glossier, and EleVen by Venus Williams.
It continues to report high growth, albeit slowed by the inflationary environment. In 2023, sales increased 39% year over year to $570 million, and gross merchandise value (GMV) increased 45% to $3.6 billion.
Global-e is not profitable according to Generally Accepted Accounting Principles (GAAP) standards, but profitability is improving. Non-GAAP gross profit in 2023 increased 46% year over year to $244.8 million, and non-GAAP gross margin increased 1.9 percentage points to 42.9%. Adjusted earnings before interest, taxes, depreciation and amortization (EBITDA) increased 90% to $92.7 million. Net loss narrowed from $195 million to $134 million.
It was a solid report, but management is guiding for a slowdown. Revenue is expected to be approximately $142 million in the first quarter of 2024 and $750 million for the full year, representing growth of 20% and 31%, respectively. Still, this is still great considering the economic climate.
Shopify Partnership
Global-e has a fundamental relationship with Shopify, and an investment in Global-e gives investors some exposure to Shopify stock. Shopify is an original investor in Global-e's business and powers its platform in a variety of ways to millions of customer accounts.
The recently launched Shopify Markets Pro is actually a white-label service for Global-e's product, and management says it's doing well so far as customers continue to adopt the platform for their websites. It says that it is.
Shopify is home to millions of small and medium-sized businesses and is growing larger, accounting for a significant portion of e-commerce worldwide. This is a huge opportunity for Global-e to grow its business.
Shopify's investment is contributing to Global-e's current net loss. Shopify has stock acquisition rights, which Global-e is amortizing as an expense on its income statement until they are fully amortized at the end of next year. This means Global-e is unlikely to make a net profit by then, and even if it does, it will pose a risk for investors.
Buy Global-e stocks on a downtrend
Investors weren't happy with Global-e's fourth quarter report, likely because of the guidance. Global-e stock fell after the report was published, and is down 9% this year, but is up 35% over the past year.
This may have been a necessary correction, given the company's rising valuation and last year's price-to-sales ratio of more than 14 times. Currently, it trades at a ratio of 10 times, which is still a rich level. However, considering Global-e's performance and potential, it may be justified. This could present an opportunity for risk-tolerant investors to buy stocks on the downside.
Jennifer Saibil holds a position at Global-e Online. The Motley Fool has positions in and recommends Global-e Online and Shopify. The Motley Fool has a disclosure policy.
