GigaCloud Down 37% in 6 Months: Should You Buy the Dip?

GigaCloud Technology Inc. GCT has been on a downward spiral lately, with significant selling pressure. The stock has dipped 36.6% against the 9% increase of the industry it belongs to and the 10.5% growth of the Zacks S&P 500 composite.

While the six-month performance paints a dull picture, looking at the year-to-date performance is crucial for a fuller understanding. GCT's stock has surged 21% so far this year, suggesting that the current downward movement is part of a correction phase. Close competitors like Revolve Group RVLV have seen a 45% rise, while Beyond BYON has suffered a 63% decline over the same period.

Six-Month Price Performance

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In the last trading session, GCT's stock closed at $22.12, which is 51% below its 52-week high of $251.3. The stock is trading below its 50-day moving average, an indication of bearish sentiment among investors.

GCT Stock Trades Below 50-Day Average

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With GCT's recent correction, many investors might be contemplating whether now is the opportune moment to buy the stock. Let's delve deeper to assess this potential.

B2B Marketplace Growth

GCT integrates its supplier-fulfilled retailing business model with research and development aimed at harnessing advanced algorithms to further refine its strong cloud infrastructure. This strategic fusion enables the company to provide a superior B2B selling and sourcing experience for all involved in the marketplace.

Addressing the rising demand for large parcel merchandise, GCT has witnessed notable growth in GigaCloud Marketplace GMV, sales volume, and the number of buyers and sellers. Sales surged 103% year over year in the second quarter of 2024. GMV increased 80.7% in the quarter. The number of active buyers and Active 3P sellers surged 66.8% and 39.8%, respectively, year over year.

GCT remains committed to expanding its B2B marketplace in terms of both buyers and sellers. The company has launched a service called Branding-as-a-Service (BaaS) to help sellers enhance their product competitiveness within the GigaCloud marketplace. By expanding its supplier base to include products from Colombia, Mexico and Turkey, GCT has increased its product diversity, allowing buyers to source a broader range of quality products from these new markets. Furthermore, the company has expanded its global fulfillment network to meet the rising demand for its marketplace, thereby enhancing support for both buyers and sellers.

Robust Liquidity Position

GCT's liquidity remains strong, with a current ratio of 1.98 at the end of the second quarter of 2024. This is in contrast to the industry average of 0.95. A current ratio above 1 indicates that the company is well-positioned to meet its obligations. GCT's strong liquidity position provides it with the financial flexibility to pursue growth opportunities and weather potential market fluctuations.

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Sales and EPS Growth Prospects Strong

The consensus mark for GCT's 2024 sales stands at $1.15 billion, suggesting year-over-year growth of 63.2%. Sales are expected to increase 16.2% in 2025. The consensus estimate for the bottom line is pegged at 2.84 cents per share, indicating 23.5% year-over-year growth. Sales are expected to increase 22.7% in 2025.

Wait for the Right Entry Point

GigaCloud's distinctive B2B logistics business model and ongoing marketplace expansion have been key drivers of its success. Given the stock's impressive surge before entering the current correction phase, we anticipate a further correction that could provide investors with a more favorable entry point. The long-term growth prospects for GCT remain robust, making it a stock worth monitoring for the right investment opportunity.

GCT currently carries a Zacks Rank #3 (Hold).

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