Is Global-E Online Still a Buy After Jumping 115%?

Global-E Online (GLBE) has had a volatile first year of trading. It IPOed in May 2021, and shares at one point rose 160% before falling back to 115% gains today. This means that — like many other tech stocks — shares are…

down roughly 33% off their all-time high.

With so much volatility and the fact that shares have doubled in less than a year, many investors might simply look away from this stock. However, I think that could be a mistake five years from now because the future for Global-E is incredibly bright. While there are some risks to the stock, I think that Global-E is a great stock to slowly buy today and hold for the long term. Here’s why.

A bright future

Global-E serves e-commerce companies looking to grow their international businesses. Unless you are a multi-billion dollar enterprise, expanding internationally can be very difficult. Not only are there language barriers, but there are also payment and currency barriers to entering a new country. Navigating these independently can be increasingly challenging, and processing payments and exchanging currencies is an area where a mistake is costly. This is where Global-E helps.

With experience and partnerships in 25 native languages, 100 currencies, 150 different payment methods, and 20 shipping providers, Global-E can effectively help any business expand internationally. The customer churn demonstrates how difficult and how needed Global-E is today. Since 2018, Global-E has consistently had less than 2% customer churn, showing that Global-E is extremely valuable to its customers. The company earns service fees based on its merchants’ gross merchandise volume (GMV), so when its customers do better, Global-E does better.

The company’s incentives allow for a complete focus on customer success, and this has resulted in impressive growth. In the third quarter of 2021, the company grew its GMV 86% year over year, resulting in 77% top-line growth for the quarter. What is especially impressive about Global-E is its impressive customer relationship expansion. Its net retention for the first six months of 2021 was above 140%, meaning that existing customers spent 40% more during that period than they did in the year-ago period.

The company has also landed a major partnership with Shopify (NYSE:SHOP). This partnership gives Shopify merchants access to Global-E’s services. Many of Shopify’s merchants are looking to expand internationally but need help growing their businesses, so Global-E will likely benefit immensely from this partnership.

There are always risks

While there are a lot of highlights with Global-E, there are always lowlights. The first is the company’s unprofitability. In Q3, the company’s net loss represented 48% of revenues for the period, and the company is right on the border of being free cash flow-positive. In the first nine months of 2021, the company’s free cash flow was negative $9 million, but it generated a positive $5 million in Q3.

As an investor might expect with a company that has extremely low churn and is growing fast, the company’s valuation is high. Even after the 33% drop from its highs, Global-E still trades at 32 times sales — a nosebleed valuation for any investor. Additionally, while the partnership with…


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