2023-03-14 09:54:05 ET
Summary
- Consumer stocks have lost their relative strength lately amid an emerging risk-off trading environment.
- I see shares of Global-e Online as pricey but a compelling growth story remains in tact.
- I spot two key technical price levels to watch on the charts.
The Consumer Discretionary sector surged to start 2023 on a relative basis versus the S&P 500. The last 6 weeks have been tougher as uneasiness about the state of the consumer going forward becomes front and center. I see balanced risks with Global-e Online (GLBE). With strong sales, free cash flow, but no earnings, and with a consolidating chart, I reiterated my hold.
Consumer Discretionary Stocks Underperforming Since Early February
According to Bank of America Global Research, Global-e Online was founded in 2013 by Amir Schlachet, Shahar Tamari, and Nir Debbi. The company employs more than 350 people, as of 2020. Its products are designed to help D2C retail companies facilitate cross-border transactions to over 200+ markets, accepting 100+ currencies, and 150+ payment options. It operates a platform to enable and accelerate direct-to-consumer cross-border e-commerce in Israel, the United Kingdom, the United States, and internationally. Its platform enables international shoppers to buy online and merchants to sell from, and to, worldwide.
The Israel-based $4.0 billion market cap Internet & Direct Marketing Retail industry company within the Consumer Discretionary sector does not have positive trailing 12-month GAAP earnings and does not pay a dividend, according to The Wall Street Journal. Since my last report on GLBE, the short interest has increased slightly to 12.0%.
Back in February, Global-e topped analysts' earnings estimates with a per-share loss of just $0.18. Revenues were also verified to the good side with a 69% YoY jump. Gross Merchandise Volume (GMV) rose 66% from the same period a year ago to hit $839 million. Perhaps more importantly, revenue guidance came in on par with what analysts were expecting for Q1, but FY 2023 total sales guidance was considerably above the street estimate.
Shares jumped 6% immediately after the numbers hit the tape, but it has been a downward trend in the last few weeks. I still think the company has something to prove with respect to its profitability. Renewing its partnership with Shopify (SHOP) remains a key risk and variable for GLBE.
On valuation , analysts at BofA see earnings continuing to be in the red through 2025. Estimates were reduced following the November earnings miss last year. The Bloomberg consensus outlook calls for less negative EPS though. The company is free cash flow positive, but don’t expect dividends to be paid on this non-profitable consumer stock.
With a very high EV/EBITDA rating and trading at more than 7x forward sales, I continue to think the stock is ideal for this environment and high growth is compelling.
Global-E: Earnings, Valuation, Free Cash Flow Forecasts
Looking ahead, corporate event data provided by Wall Street Horizon shows an unconfirmed Q1 2023 earnings date of Tuesday, May 16 before market open. The management team is also slated to speak at the 24 th Annual Israeli Conference by Oppenheimer on May 21 which could spark share price volatility.
Corporate Event Risk Calendar
The Technical Take
GLBE continues to consolidate. Notice in the chart below that shares have put in a pair of lower highs and higher lows. I am watching resistance near $30 and support just under $20. That is a wide range, and the stock is working off the top end of that zone now. What’s more, an early-year rally failed on an attempt to climb above the August 2022 peak. I would like to see that level reclaimed to support the bullish technical thesis.
What is positive, though, is that GLBE had a bullish RSI divergence at the December low which helped trigger the near doubling of the stock price to early February. Some bottoming signs are happening here, but the bulls still have work to do. A rally above $38 could spark momentum buying while a move down to the low $20s is a favorable risk/reward setup too.
GLBE: Shares Consolidate, Trying to Form A Defined Bottom
The Bottom Line
I am keeping my hold recommendation on Global-e. I like that the stock bottomed well before the market, it’s simply consolidating now. Fundamentally, top-line growth is high but multiple valuation measures continue to suggest shares are not yet worthy of a GARP play.
For further details see:
Global-e Online: Shares Consolidating Following A Robust Sales Outlook