Can Global-e Online (NASDAQ:GLBE) be the Next Shopify?

(Also contributed to this article: Yulia Vaiman)

Global-e Online (NASDAQ: GLBE) might not be as familiar to traders as Amazon (NASDAQ: AMZN) and Shopify (NYSE: SHOP). However, it could be a portfolio’s secret weapon, especially if one’s seeking exposure to e-commerce stocks. Headquartered in Israel, Global-e Online provides a popular e-commerce platform with a strong focus on helping sellers facilitate cross-border business. Eager traders might think of GLBE as the next Amazon, but don’t get the wrong idea; its business model isn’t similar to Amazon’s.

What makes Global-e Online a gem among e-commerce businesses? Sure, the company’s second-quarter results were impressive and suggest a fast growth trajectory in key areas. Although financial data is important, there’s much more to Global-e’s story than the raw numbers. In particular, Global-e Online has potent partnerships, including one with a highly influential entertainment brand.

Moreover, Global-e Online has the backing of a fund manager who’s known for picking out high-conviction innovators and disruptors.

From Banking to E-Commerce

Global-e Online focuses on sellers and especially reducing the complexity/friction of sometimes complicated cross-border e-commerce transactions. It’s a niche business to be in, but specialization is Global-e Online’s biggest strength, as this means the company isn’t competing directly with Amazon and its clones. The company was co-founded by three veterans of Bank Hapoalim (OTC: BKHYY), one of the two largest banks in Israel.

Amir Schlachet, Shahar Tamari, and Nir Debbi have known each other for a long time. They built glorious careers when Schlachet and Debbi decided to try to do something different from the regular path to the C-suite in finance.

Together with Shahar, they began their search for ideas – something fun with great potential and as little suffocating regulation as possible. The year was 2013, and cross-border e-commerce was just gaining popularity – but sellers and buyers encountered difficulties and high costs, as Global-e’s founders soon learned.

Nir Debbi had ordered a pair of shoes from abroad; the shipping cost was higher than the price of the shoes ordered. This has led the trio to the idea upon which Global-e Online was built: to facilitate and localize e-commerce by providing a way for merchants to deal with numerous currencies, rules, and cross-border problems. As with most highly successful companies, Global-e started as an easy solution to the problem in a fast-growing market.  

As the company put it, “Global-e makes selling internationally as simple as selling domestically” by leveraging “best-in-class localization capabilities, big-data best-practice business intelligence models, streamlined international logistics and vast cross-border experience” so that online retailers can “sell from, and to, anywhere in the world and seamlessly expand their brand worldwide.”

Global-e founders’ backgrounds are in finance and not technology per se, which has made it easier for them to understand the market’s needs and shortcomings and provide a well-thought-out solution. A fun fact: out of the 25-slide pitch deck they’d shown their first-round investors, one slide described the technology, and 24 were dedicated to market research, strategy, and the business model. This was the exact opposite of the regular start-up pitch practices, and the investors were more than enthusiastic.  

There’s more to the success story than a vast knowledge of the numbers-crunching business. As CEO Amir Schlachet looks back at the long way his company has made, he says that the friendship and trust with the other two founders helped a lot.

Their different perspectives and opinions complement each other, helping them avoid the many pitfalls awaiting start-ups on their way to success. After all these years, the “three musketeers” share the same office and like to take their families on vacation together. Fun fact: their wives have a WhatsApp group that is called “Home Front Command.”

Global-e was Succesful Before Its IPO

Global-e was a successful business before it went public; since its IPO in May 2021, the business has expanded. Meanwhile, the company’s stock has been volatile, surging more than 200% to its peak last year, then tumbling over 80% from peak to trough before surging again. Amir Schlachet seems unfazed: he says that although he pays close attention to the stock price and distrusts founders that pretend they don’t, it doesn’t determine his actions as a CEO or the company’s policy.

For him, the IPO is in no way “a chance to cash out” but a way for him and his co-founders to take Global-e as far as possible.

He believes that the market’s opinion on the stock will eventually converge with the company’s growth trajectory. As was with the pitch deck, the three friends still weigh their steps carefully, basing them on market research, financial numbers, and logic. Amir Shlachet believes that even after all these successful years, there’s about 90% of the market share for Global-e to catch, and he believes the company will be able to do it, adding more services and riding on the growing e-commerce trends. 

Of course, he sees the challenges clearly, as a pragmatic CEO should. In the short term, the COVID-19 echoes still reverberate through supply chains, while macroeconomic and geopolitical issues impact gross merchandise value (GMV) and profitability. However, in the long term, these should level out; according to Shlachet, the e-commerce trend – and specifically the DTC trend – is strongly uptrending. 

Global-e Online’s Impressive Quarterly Results and Disney Partnership

It’s no exaggeration to say that Global-e Online really knocked it out of the park during 2022’s second quarter. The company’s growth story continued during the quarter, and there’s data to prove it. Besides, Global-e Online disclosed a partnership with Disney (NYSE: DIS), one of the world’s most beloved entertainment brands.

Everywhere you look, Global-e Online demonstrated growth in Q2 2022. The company’s GMV (gross merchandise value) increased 64% year-over-year to $534 million; revenue jumped 52% to $87.3 million, and non-GAAP gross profit catapulted 77% to $36.5 million.

Though the company is not GAAP profitable, it churns out positive and rising gross profit and cash flow numbers. The company says it’s concentrating on sustainable long-term growth, whereas some accounting metrics matter much less than they do from a short-term stock trader’s point of view. 

During the second quarter of 2022, Global-e Online established its partnership with Disney “to support their direct-to-consumer efforts,” based on Global-e Online’s “multi-local offering.” Already, Global-e Online has launched “several markets” in the Asia Pacific region as a “first phase” for Disney.

Of course, while this is huge news, Disney isn’t Global-e Online’s only notable client. The company also conducts business with Adidas (OTC: ADDYY) as well as fashion brands Rag & Bone and Zadig & Voltaire. After taking a deep dive into Global-e’s business model and growth potential, we really ought to call it the next Shopify instead of the next Amazon, and it’s certainly no coincidence that Shopify owns roughly 6.5% of Global-e Online and has a long-standing strategic partnership with the company.

Additionally, TipRanks has identified Global-e Online as a “Strong Buy stock” that Ark Invest founder Cathie Wood is doubling down on. Reportedly, Wood added 249,095 shares of GLBE recently, expanding her Global-e Online stock holdings by 44% to an astounding 812,173 shares. There’s no way to know for certain exactly why Wood grew her stake so dramatically. However, she has a keen eye for innovation and disruption, so Global-e Online could be Wood’s next big winner.


Source link Shopify News

Post Author: Adam Jacob

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