1 Growth stock down 74% this year, it’s a screaming buy right now
A lousy year for growth stock investors just keeps getting worse. The iShares S&P 500 Growth ETF is down 23% since the start of 2022.
The global economy already had frozen legs thanks to the ongoing pandemic. Then, Russia’s invasion of Ukraine effectively knocked both countries offline in the blink of an eye. As is often the case when things look bleak, the bottom slumped under the best stocks as quickly as the worst.
Right now, one of the leading e-commerce stocks is down 74% since the start of 2022. One glance at its chart is enough to scare off most investors, but the road ahead is a lot smoother than you think. In fact, this cross-border direct-to-consumer facilitator currently looks like a screaming buy.
Global-e Online is a growth stock that trades at value stock prices
Global-e online (GLBE -5.81%) recently upset investors by admitting that the war in Europe will negatively affect its performance this year. All the company did was cut its 2022 revenue outlook from a range of $411-421 million to a range of $383-403 million.
Even at the low end of Global-e Online’s new revenue forecast, the company expects revenue to grow 56% from 2021. That’s all the more impressive considering that 2022 will be a relatively lousy year for e-commerce, now that pandemic-related restrictions on shopping, dining, and in-person travel have mostly been lifted.
Global-e Online specializes in cross-border trade for businesses around the world, and a significant portion of its business comes from the European continent. The new guidance reflects a significant loss of business related to Russia’s invasion of Ukraine, but the stock price has been taken down far too much.
At recent prices, the company is trading at 7.6 times the midpoint of this year’s revenue forecast. This would be a reasonable valuation for an e-commerce business that you expect to grow around 10% per year. That’s an incredibly low price to pay for a company that’s set to grow more than 50% in a particularly tough year for its industry.
At the moment, Global-e Online is losing money on a GAAP basis, but it breaks even once we adjust for non-cash expenses. If the company continues on its current trajectory, it will soon be highly profitable when measured by any yardstick. Global-e Online reported first-quarter adjusted gross margin of 39.1% of total revenue, a big improvement from the 33.3% gross margin reported a year earlier. early.
A longstanding shift from traditional retail to online shopping that has accelerated in 2020 and 2021 isn’t the only tailwind pushing Global-e forward. Calculating import duties and translating shopping experiences into new languages present challenges that most direct-to-consumer businesses cannot handle on their own. The company’s increasing level of cross-border competence continues to attract larger clients who want to market their brands directly to consumers around the world.
Even a big, well-established brand like Adidas knows that hiring Global-e Online makes more sense than trying to build their own cross-border e-commerce solutions. To that end, Germany’s most popular sportswear company launched into new markets with Global-e Online in the first quarter. Already, Global-e is facilitating Adidas sales in 16 international markets, with more on the way.
On its first quarter earnings call, management said the number of new merchants doing business with Global-e Online so far this year is almost double the number it launched at the same time in 2021. Don’t be surprised if the rapid growth continues through the end of the year.
North American e-commerce giant Shopify (STORE -11.34%) acquired a significant stake in Global-e Online shortly before its public debut last year, but the new native partner integration only emerged from its pilot phase last month. With Shopify’s huge list of customers having access to Global-e Online services, cross-border transactions could exceed expectations by the end of the year.