Today we have an extremely speculative idea.: take shares of the Israeli e-commerce platform Global-E Online (NASDAQ: GLBE), in order to capitalize on the speculative growth of these shares after their recent fall.
Growth potential and validity: 33% behind 2 of the year; 9% per annum during 15 years.
Why stocks can go up: the hype around the online commerce sector will drive the growth of company quotes, working in this area.
How do we act: we take shares now by 58,55 $.
When creating the material, sources were used, inaccessible to users from the Russian Federation. We hope, Do you know, what to do.
No guarantees
Our reflections are based on the analysis of the company's business and the personal experience of our investors, but remember: not a fact, that the investment idea will work like this, as we expect. Everything, what we write, are forecasts and hypotheses, not a call to action. To rely on our reflections or not – it's up to you.
And what is there with the author's forecasts
Research, like this and this, talk about, that the accuracy of target price predictions is low. And that's ok: there are always too many surprises on the stock exchange and accurate forecasts are rarely realized. If the situation were reversed, then funds based on computer algorithms would show results better than people, but alas, they work worse.
So we're not trying to build complex models.. The profitability forecast in the article is the author's expectations. We specify this forecast for the landmark. As with the investment idea in general, readers decide for themselves, it is worth trusting the author and focusing on the forecast or not.
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Investment editorial office
What the company makes money on
GLBE is an e-commerce platform for enterprises, specializing in international parcels. Companies, who are looking for opportunities to sell their products to consumers directly, GLBE solutions allow you to increase traffic conversion, optimize sales and logistics.
GLBE just recently went public in the US in May 2021. Since the company is fast growing, then her registration prospectus, reflecting the situation as of the end of June this year, it will be less useful for us, rather than the last quarterly report of the company, reflecting the situation for the first 9 months of 2021. Therefore, whenever possible, we will refer specifically to the latest quarterly report..
According to him, for the latest 9 months, the company's revenue was divided into the following segments:
- Service Fees - 38%. Company commission, which it collects from sellers for selling products using the GLBE platform.
- Logistics Services - 62%. This is GLBE's job of shipping and delivering the product to the end consumer..
By region, where are the shops, using the GLBE platform, the proceeds are divided like this: United Kingdom — 47%, USA - 29% and the countries of the European Union - 23%.
Arguments in favor of the company
Fell down. Since September 2021, the company's shares have fallen heavily under the weight of its exorbitant high prices.: with 79 to 58,55 $. So,, we can pick them up in anticipation of the rebound.
Big game. While GLBE will be favored by several trends.
The growth in investment in warehouse real estate against the background of low availability of warehouses in the United States indicates an increase in demand for solutions in the field of online sales. America's retailers will increase their investment in developing direct sales channels to their customers amid constant uncertainty about new strains and restrictions - and the GLBE platform will allow them to fine-tune these processes..
A new wave of quarantine bans in the Old World will force local stores to develop online sales en masse, which also means positive for GLBE, after all, the company makes the main money on sellers from the UK and EU countries.
Both trends can be considered quite long-term - because the pandemic will never end.. Although you also need to understand, that there will sometimes be kickbacks, caused by periodic improvement of the epidemiological situation.
GLBE is comfortable for most retail brands due to its good, smart engine, on which its platform operates: based on machine learning, the consumer habits of large masses of buyers are studied, which allows for more effective marketing.
And it is also widely represented in the world.: the company operates in 170 countries, - and a particular merchant's store is usually limited to shipping options in a much smaller number of countries. That's why I think, that small, medium and some large brands will increasingly use GLBE, bypassing the same Amazon, which is notorious for, that competes with its own customers-sellers.
Promising. The company does not have the largest capitalization of $8.62 billion, so its quotes may well pump up the masses of retail investors. In addition, it is quite possible to buy it by someone larger..
What can get in the way
Insane price. The company has an abnormal P / S: even after the fall in stocks, it costs about 43 its annual revenue. Moreover, it is unprofitable. And this guarantees the volatility of these stocks., especially against the background of rate hikes FED and rise in the cost of loans.
A bunch of competitors and other problems. In the same niche - the organization of cross-border online sales - there are a lot of other companies. For example, ON24, BigCommerce и Borderfree. And that, what are they on the market, will not allow GLBE to increase the margin.
At the same time, the current increase in logistics costs around the world threatens to worsen the situation with the unprofitability of GLBE. So you need to be mentally prepared for the bankruptcy of this company, especially since it will also have to compete with such giants., like Alibaba and Amazon, who, thanks to their bottomless pockets, can afford to wage a "war of attrition" with GLBE and bring it to the brink of bankruptcy, then buy it cheap.
Not so fast. The recent decline in online retail sales in the US was due to a temporary improvement in the epidemiological situation.. And although in the long run such improvements will look like rare holidays, periodic decline in online sales and growth of offline retail activity will negatively affect GLBE financials.
I do not think, that rare moments of improvement in the epidemiological situation will bury her business, after all, online retail was growing even before the pandemic, but this may slow down the growth of its revenue. And given the giant P / S company, investors are counting, that GLBE's revenue growth rates will not only not decrease, but even grow. Investor disappointment can hit these overvalued stocks very hard..
Cain's stamp in the passport. Israeli company, with staff and assets primarily in Israel. So,, there are risks of blockade of the company's shares by ESG investors in case, if the smoldering conflict between Israel and the Palestinians flares up with renewed vigor.
What's the bottom line?
You can take shares now by 58,55 $. I think, that within the next two years they will return to the level 79 $, who asked for them back in September.
There is also an option to hold these shares 15 years. I do not think, that the Amazon killer will grow out of the company during this time, but, probably, someone will buy it, fulfilling the dream of all unprofitable startups.
This idea is very volatile., so if you are not ready to endure, that the stock will shake, then stay away from them.
