Morgan Stanley Downgrades Global-E Online To Equal-Weight - Read Why

Morgan Stanley analyst James Faucette downgraded Global-E Online Ltd GLBE from Overweight to Equal-Weight and raised the price target from $38 to $45.

The analyst said many of the most bullish investors expect upside to the revised GMV and revenue estimates, +39.6% '24 GMV growth and +39.8% '24 revenue growth.

While the analyst expects that the company is likely to deliver years of compounding growth, it is to believe that the market has adequately anticipated the likely growth rates for '23 and '24, and built those expectations into valuation.

The analyst believes a substantial upside to the estimates is unlikely as there is often substantial incremental strategic development work required to service both GLBE's largest brands as well as smaller customers leveraging GLBE's self-service capabilities.

In recent months, the analyst has seen a

substantial reduction in bear concerns around GLBE, particularly since GLBE has acquired competitors, eCommerce performance has been better, and the investors have become more comfortable with the durability of GLBE's relationship with Shopify Inc. SHOP.

While the analyst continues to expect cross-border eCommerce to outpace traditional eCommerce, doubts about the impact of the rising cost of capital on the secular trend of direct-to-consumer (DTC) commerce have emerged.

The rise in DTC commerce has gained from low capital costs, but now brands have to answer whether improved targeting and brand development enabled by technology can offset the increasing costs of inventory procurement and management, added the analyst.

The analyst justified the downgrade saying market growth expectations have exceeded the raised estimates and valuation has expanded meaningfully, such that risk-reward appears balanced at current levels.

Price Action: GLBE shares are trading lower by 2.73% at $43.57 on the last check Wednesday.