Why Global-e Stock Is a Smart Buy After Q3 Earnings

Global-e Online (GLBE -1.18%) specializes in cross-border e-commerce. Its platform helps merchants boost conversion rates and navigate regulatory complexities in international markets. Despite going public in May 2021, the stock is already up over 146%. In this Backstage Pass video, recorded on Nov. 10, 2021, Motley Fool contributor Trevor Jennewine discusses Global-e's third-quarter financial results, explaining why now looks like a good time to buy a few shares.

Trevor Jennewine: This company is in the e-commerce business. Specifically, its platform integrates with merchants online stores to help optimize them for international buyers. It also provides or helps businesses navigate complexities like cross-border import duties and taxes, fulfillment services, and returns management. The goal here is to basically boost international sales.

The company reported earnings yesterday. Gross merchandise value came in at $352 million. That was up 86%. That was a beat based on management's expectations. Revenue was $59 million, up 77%, and that was also a beat based on management's expectations. The gross profit margin actually ticked up eight percentage points to about 39%, and the driver behind that is a shift in revenue mix. The company generates revenue for platform services, where it helps optimize websites for international markets; and then it also provides fulfillment services where it's generating money from shipping and handling. The margin on the platform services is higher and that segment is growing more quickly. Fees from platform services were up 89%, and management expects that trend to continue, so the gross margins should keep trending upward over time.

The company's adjusted EBITDA was $7.7 million, up well over 100%. Another beat there. Global-e posted a GAAP loss of $0.19 cents per diluted share. However, if you back out the non-cash expense related to the Shopify warrants, Global-e was actually profitable on a GAAP basis, just barely.

To provide a little context on that, Shopify has over a 6% stake in the company, roughly, and it still has warrants that give it the right to purchase more stock. In exchange for that, Global-e has an exclusive partnership with Shopify, whereby it's the sole provider of cross-border solutions to all of Shopify merchants. That was one of the highlights from management's commentary. They are continuing to make progress on that partnership. Shopify actually launched a new platform called Shopify Markets back in September, and this is basically a central hub that has all the tools merchants need to take their businesses international. And this is powered by Global-e, and they have their first merchants using the integrated platform and one of the big names was Netflix. Netflix is live on the platform, and so that should continue to be a growth driver.

During the quarter, Global-e also expanded its relationship with LVMH brands, notably Sephora Asia. The company is really trying to push into the Asia-Pacific region. That partnership should be a growth driver. A lot of the revenue right now is coming from the UK and the U.S., so it's expanding beyond those two markets. It also partnered with Australia Post, which the management sees as a growth driver in Australia and also the Asia-Pacific region as well.

Looking at the next quarter: Management is looking for GMV of about $470 million. Growth merchandise value of $470 million, and that would be up about 55%. Revenue of $77.4 million, up 44%, and both of those figures would be a good deceleration from this quarter. However, management also low-balled their estimates for this quarter, so that, this might just be conservative guidance. And then they are looking for adjusted EBITDA of $7.8 million.

If you follow the stock, you noticed that it was down about 16%, 17% today. I think it got ahead of itself. You can see in the chart there, that Global-e almost tripled since its IPO back in May. And then it has come down, and actually it's about 40% below its all-time high now, a little over that. I think it got a little ahead of itself, and I think management's guidance was a little on the weak side. But all things considered, I think the company is moving in the right direction. Forrester Research puts this cross-border e-commerce market at $736 billion by 2023. To put that in context, Global-e's GMV was about $1.3 billion over the last 12 months -- way less than 1% of their addressable market. I think the partnership with Shopify could be huge. When Global-e reported or filed a registration statement with the SEC in June, they reported having 522 merchants on the platform. Shopify has 1.7 million. So that could be a significant growth driver. All things considered, if you're interested in this company, I think now is a good time to buy.