Can Global-E Be The Next Shopify?

By StoryTrading

SHOP is a partner and 5% investor in GLBE with the option to increase their stake
Fundamentally, Global-e Online GLBE stands-out from other growth stocks as it is already profitable

Catalysts include the recent acquisition of Flow Commerce and potential new partnerships

Technically, the stock has been resilient and Rexman sees a clear path to >$100

There is great intrigue in e-commerce stock, Global-E (GLBE), among growth investors as it’s often compared to Shopify SHOP whose stock has appreciated over 1000% in the past 3 years. Can GLBE be the next SHOP?
We asked this question of our community, and contributor Akhil stepped up to the plate to present this as StoryTrading’s latest VIP Pick after he researched the opportunity. Akhil has shown a track record of being able to analyze larger cap stocks with prowess. His prior VIP pick was metaverse play, Matterport (MTTR) which earned over a 50% return in a little over 2 weeks, before he closed it out at the top due to valuation concerns.
Akhil believes GLBE is positively indicated for all four StoryTrading pillars of Fundamentals, Catalysts, Sentiment, and Technicals. When evaluating a stock holistically through the four pillars, StoryTraders seek to identify inflection points in stock prices in an effort to outperform markets.

Overview

GLBE is a global e-commerce play with a focus on facilitating the complexities involved in international transactions. Their offering works seamlessly through the SHOP platform allowing any customer to add GLBE’s services to their SHOP e-commerce site. 

Akhil described GLBE as “a platform to enable global, direct to consumer D2C cross border e-commerce. It helps increase the conversion of international traffic into sales by removing much of the complexity associated with international e-commerce. The platform provides a mission-critical, integrated solution that creates a localized and frictionless shopper experience and is simple to manage, flexible to adjust and smart in its local market insights and best practices.”

GLBE has partnered with many large companies; not only with SHOP, but also with Meta Platforms FB, Netflix NFLX, and many other international brands. Its main value propositions are reducing merchant complexity and using Big Data to provide analytics for their customers.
Regarding their partnership with SHOP, not only is GLBE’s product available through the SHOP platform, but SHOP also invested nearly $200 million into the GLBE pre-IPO for a 5% stake, with the option to increase its stake to 13.6% through the exercise of warrants.

Below is an example of the GLBE integration at Netflix.com.

With this understanding of GLBE’s products and services, attention is turned to StoryTrading’s four pillars of Fundamentals, Catalysts, Sentiment, and Technicals. All price action is determined by a combination of these four factors and understanding it can empower better decision making and help to identify inflection points in stocks.

Fundamentals

GLBE has been growing consistently since inception, with 77% YoY revenue growth in Q3 2021. The company is expanding gross margins, has had a positive adjusted EBITDA since its IPO, and currently has a debt/equity ratio of 0. As of October 1st, it had $391 million cash on hand from the IPO and secondary offering it completed in 2021. Net loss in the most recent quarter was $28 million giving GLBE a cash runway of approximately four years if those figures are annualized.


As previously mentioned, GLBE’s gross margins have been steadily rising. Improvement to gross margins are considered important by many investors in high growth companies because they represent an increase to future EPS for each dollar of revenue growth. Management has said they anticipate further improvements to gross margin in the future.

According to management, GLBE has a TAM of over $700 billion, and penetration of this market is at an early stage outside of North America. Compared to this TAM, GLBE’s enterprise value is only 8.6B compared with SHOP at 166B which suggests that GLBE could be at its infancy. 

Catalysts

On November 24, GLBE purchased Flow Commerce, a cross border merchant platform. This acquisition expands GLBE’s product offerings and addressable market of merchants. The announcement of this catalyst may have helped GLBE withstand the latest growth sell-off and contributed to its relative recent out-performance. 

As a profitable growth company with a strong balance sheet, additional buyouts could happen and may further bolster their competitive advantage. Other potential catalysts could include:

• Expansion of SHOP partnership
• SHOP buyout offer
• Winning of additional major international brands as partners or customers
• Q4 earnings report (estimated to be on or around 02/19/2022)

Sentiment

Sentiment is key in understanding price action, and  “over-” and “under-” valuations. StoryTrading sentiment however is defined differently than the way most approach it. Here, we are talking about company sentiment, not stock sentiment. Items related to company sentiment include net street opinion on management, the sector, long-term prospects for growth, competitive advantages, and product-market fit among other qualitative factors.
The single most important item impacting GLBE sentiment is its partnership with SHOP, including the fact that SHOP has invested in GLBE. The TAM for e-commerce is very large and some investors may hope that the 1000% return in SHOP over the past 3 years can be replicated with GLBE. The company is itself aware of the importance of this relationship. It was a key feature of the GLBE IPO presentation, and several analysts and articles have drawn comparisons between the two companies or speculated on the potential upside of the partnership. 

The impact of the positive sentiment in GLBE can be seen by its significant outperformance compared to its growth stock peers since the recent growth stock correction. While many growth names have sold off in recent weeks due to the expectation of higher interest rates, GLBE’s price has been resilient and outperformed. This is likely due to high sentiment for GLBE as described above and the fact that it's already profitable, which differentiates itself from other growth stocks as they may need less access to capital in the future.

The recent divergence can be visualized by comparing GLBE price action with the ARKK ETF, a popular proxy for growth stocks. 

Technicals

As mentioned above, GLBE has recently out-performed its peers. But what comes next? StoryTrading consults with technical expert Rexman, to identify resistance levels and bull targets. In his below chart, Rexman explains:
“GLBE pretty bullish setup. Current month (circled) seated at a long-term inverse support (yellow dot on the left). Possibly breaks out of the trend and moves upwards, into 2022. If it takes out all the previous monthly highs, this is a >$100 stock IMO.” You can find Rexman on Twitter here.

Summary

StoryTrading empowers individuals to make the best informed trade and investment decisions through a holistic view of stocks based on the four pillars of Fundamentals, Catalysts, Sentiment, and Technicals. Analyzing all four pillars together can also help to identify key inflection points.

Fundamentally, although GLBE could be considered by some to be an over-valued “growth” company, it stands out because it’s already profitable and may be in its infancy compared to the large TAM. Technically, the stock has out-perforfmed its peers during the recent growth stock selloff and any number of upcoming catalysts could spark the next move up. .
While the three pillars of fundamentals, technicals, and catalysts are positively indicated, sentiment clearly plays a significant role in the performance of GLBE. The SHOP investment in GLBE entice many investors, and perhaps correctly so. 

So will GLBE be the next SHOP? That's for you and the rest of the market to determine. We'll be here to tell the story as events unfold!