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September 01, 2020 1:20pm
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Global-e Online is a Must-Own eCommerce Stock

Global-e Online (NASDAQ: GLBE) is succeeding because it offers three things merchants need in one place: eCommerce, direct-to-consumer access, and international expansion. eCommerce is entrenched in our lives and a requirement for any business today. International expansion, specifically cross-border transactions, is a critical avenue for businesses to tap because it exponentially expands the addressable market for any business. Direct-to-consumer business models are the new rage in retail, cutting out the middlemen in favor of higher-margin businesses.  

To put the company and its platform into perspective, consider that brands under its service umbrella include Ralph Lauren (NYSE: RL), Disney (NYSE: DIS) and Netflix (NASDAQ: NFLX). Disney and Netflix are two digital powerhouses that use this service. They use it because of its simplicity and the speed at which new markets are opened for retailers. Among the highlights of the services provided are localized advertisements and payment platforms, ensuring businesses and consumers speak the same language and use the same currencies. 

Global-e Had a Solid Quarter; Guides Higher 

Globa-e Online had a solid Q1, growing revenue 24% to $145.9 million. The top line outpaced the consensus estimate by 300 basis points and led to increased guidance. The business was supported by growth in service fees and fulfillment services, leading to a wider adjusted margin. Gross merchandise volume, a leading indicator of results, increased by 32% to set a new record aided by the addition of new brands and launches in new markets. 

Margin news is good. The company posted another GAAP loss, but it was better than expected and quarterly losses are narrowing. The $0.19 GAAP loss is a nickel ahead of consensus and puts the company on track to reach profitability ahead of forecasts. Adjusted EBITDA is up 50% YOY and positive. 

Guidance is another strength. The company issued its Q2 guidance and raised guidance for the year. Both are strong relative to the analyst's consensus forecast reported by Marketbeat, and the full-year outlook will likely be raised again. New brands and markets are being opened regularly, and the partnership with Shopify is progressing well. Shopify Markets Pro connects the two platforms, allowing Global-e to handle all cross-border transactions. 

Global-e Analysts LIft Targets

The analysts' activity following the Q1 release is mixed. Still, the net result is bullish for the market, with two maintaining their ratings and price targets, two raising price targets, and one upgrading the stock. The takeaway is that eleven analysts rate this stock at Moderate Buy and are leading the market for it higher. The consensus target has been flattish over the last quarter but is edging higher now and is up 20% compared to last year. The consensus implies a 43% upside at $43, and many recent targets, including two of the post-release revisions, are above it.   

The price action following the release is also mixed. The stock popped on the initial release but hit resistance at critical levels and is moving lower now. The critical levels coincide with major moving averages and suggest downward price pressure may continue despite the analysts' enthusiasm. There is a floor at $28.50 that may keep the market from falling further, but there is also the risk. In this scenario, a move below $28.50 could lead the market to mid to low-$20s. 

One factor suggesting that a move below $28.50 is unlikely is institutional activity. A broad representation of institutions has bought this stock on balance for three consecutive quarters. They own 95% of the stock, and their holdings grow. A move to the one-year low would be an opportune time to buy more. The stock also comes with a relatively high 10% short interest, so short-covering could quickly come into play. Again, the critical line is near $28.50. If the market confirms support, the short sellers may close positions and aid in a short-covering rally. 

GLBE stock chart

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