Disney brings the magic to this high-growth title
The global economic downturn has caused e-commerce stocks to plummet. As inflation hits its highest level in decades in many countries, investors fear that consumers will cut spending on discretionary goods, like those commonly sold on e-commerce sites.
Some companies operating in this space have already seen a pullback in demand, and the market is punishing e-commerce stocks accordingly — Global-E online (GLBE -9.05%) is no exception. Global-E helps clients accelerate cross-border sales and adoption by creating a seamless, localized experience for shoppers. The company has also streamlined logistics and returns for its customers, making it easier to do business anywhere in the world.
Shares of Global-E have fallen 46% year-to-date, despite posting strong second-quarter results and announcing a partnership with one of the world’s most influential brands: Walt disney. Here’s everything you need to know about this deal and why you might want to take a closer look at Global-E.
Disney: Global-E’s new client
On August 16, Global-E announced that it had signed a partnership with Disney to help the media giant with its direct-to-consumer e-commerce efforts in the Asia-Pacific region.
Beyond the upfront revenue potential, what’s more exciting is that Disney could expand its relationship with Global-E in the future. Disney is only in the initial phase of its rollout, but Global-E management expects Disney to expand its partnership into different geographies and outside of Asia in the future.
The increasing use of Global-E skills is not uncommon for clients: as of 2018, the company typically has a net revenue retention rate above 140%, and in 2021 it was 152%. This means that existing customers have increased their spending with Global-E by more than 50% between 2020 and 2021.
More importantly, the addition of Disney as a customer demonstrates Global-E’s value and leadership in the industry. It also shows that developing in-house cross-border e-commerce solutions can be extremely difficult, even for a $200 billion company like Disney.
Global-E’s success outside of Disney
Even without Disney, Global-E has proven itself. As of 2018, the company typically has a churn rate of 2% or less, another sign of how important its services are to customers. And during this difficult macroeconomic period, customers continued to rely heavily on the business, with second-quarter gross merchandise volume climbing 64% year-over-year to $534 million, while that revenue jumped 52% to $87 million.
The company also expanded its relationships with several existing customers, including Adidas. In the first quarter, Global-E announced that Adidas was using its services to sell in 16 markets with more to come in the coming quarters, and on the latest earnings call, management said: “During the second quarter, we also expanded our business with brands such as Adidas and Suunto, all of which added additional lanes that will be operated by Global-E. »
Global-E also saw its results improve. The company remained unprofitable, posting a net loss of $49 million in the second quarter, but its free cash flow improved significantly from $6.8 million to $30 million year over year. the other.
Investors should take a closer look at Global-E
After posting these strong results, Global-E’s quarter would have been impressive without the Disney deal. And the icing on the cake, the company’s US outbound revenue – revenue from US merchants selling internationally – jumped 104% in the quarter. Global-E now has a strong presence in the United States with 39% of revenues coming from this region.
In light of this momentum, Global-E stock is not a good deal at the time of this writing. Even after its nearly 50% selloff, the shares are trading at 17 times sales, a high valuation for any company.
However, I am convinced that it is worth buying this company at a high price. Global-E is enjoying high adoption, proving that its services are essential to the international operations of an e-commerce business. Additionally, the company demonstrates its leadership in the space by attracting major companies like Adidas and Disney.
Jamie Louko holds positions at Global-e Online Ltd. and Walt Disney. The Motley Fool holds positions and recommends Global-e Online Ltd. and Walt Disney. The Motley Fool recommends the following options: January 2024 long calls at $145 on Walt Disney and January 2024 short calls at $155 on Walt Disney. The Motley Fool has a disclosure policy.