2023-05-24 11:12:57 ET
Summary
- Global e-commerce trends are not as strong as they were several quarters ago as consumer spending softens.
- Global-e Online managed to report a solid Q1 and raised its FY guidance range.
- As the firm moves closer to operating profits, I spot new technical trends to watch.
Global e-commerce stocks caught a reprieve in Q4 last year through this past Groundhog Day. But shadows quickly emerged on the tech-heavy consumer group. Relative to the S&P 500, the Global X E-commerce ETF (EBIZ) has cratered in the last 2+ months. Rising interest rates and a flight to quality seen in mega-cap tech have hurt the group. Moreover, emerging signs of consumer weakness are not helping.
Still, Global-e Online (GLBE) reported a solid Q1 and raised its guidance. I reiterate my hold rating, but I am growing more optimistic based on the fundamentals and technicals.
Global e-Commerce ETF Struggles Since Early February
According to Bank of America Global Research, GLBE’s 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 Broadline 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.
GLBE traded down post-earnings earlier this week despite reporting a strong 54% rise in annual revenue. Q1 sales totaled $117.6 million while adjusted EBITDA was up markedly from $3.3 million in Q1 2022 to $14.5 million this past quarter. The management team sees FY2023 revenue of $562 million to $590 million, a modest increase from what was seen previously. Adjusted EBITDA guidance also inched up.
I especially liked how operating margins were up 230 basis points on a year-on-year basis. Overall, it was a decent quarter, and the guidance hike was good to see. GLBE is executing impressively in a weakening consumer environment, and its partnership with Shopify continues to boost sales. Something that could drive upside results down the line is the leveraging of AI to streamline operations.
On valuation , analysts at BofA see negative per-share profits for the coming quarters, but the Bloomberg consensus outlook now calls for a positive inflection in EPS by FY2025. No dividends are expected, but the firm is free cash flow positive despite reporting operating earnings declines. GLBE now trades at more than 9x forward sales and almost 6x book but it continues to sport an A growth rating .
The average Wall Street price target is in the low $40s, which makes sense given the robust growth outlook. But I remain a hold until profitability signs improve, also a developing technical situation must be monitored.
GLBE: Earnings, Valuation, Free Cash Flow Forecasts
Valuation Grades Are Weak, But Significant EPS Growth Ahead
Seeking Alpha
Looking ahead, corporate event data provided by Wall Street Horizon show an unconfirmed Q2 2023 earnings date of Wednesday, August 16. The management team is also slated to speak at the Morgan Stanley 14th Annual US Financials Payments & CRE Conference 2023 which could spark share price volatility from June 12 through June 14. Out in Q3, GLBE is also expected to present at the Jefferies Israel Tech Trek 2023 event .
Corporate Event Risk Calendar
The Technical Take
A new technical situation has emerged with GLBE. Notice in the chart below that an ascending triangle pattern with resistance in the $35 to $38 range is now key to watch. Should a bullish breakout take place, then an upside measured move price objective to near $55 would trigger. I see near-term resistance in the $47 to $48 range based on the low end of the 2021 all-time high area.
What I like here is that the 200-day moving average is now consistently upward-sloping, indicating the bulls have control of price action after a protracted downtrend from the Q3 2021 high to the all-time low notched just over a year ago. A breakdown under the May low of $26 would be bearish as that would break a series of higher lows off the Q2 2022 nadir. Overall, constructive signs are building, but a bullish confirmation has not yet happened.
GLBE: Bullish Ascending Triangle Pattern, Rising 200dma
The Bottom Line
I continue to have a hold on GLBE. Should growth indeed materialize, the stock is arguably undervalued, but there is much uncertainty given the state of spending.
For further details see:
Global-e Online: Strong Q1 Results Despite Tough Consumer Trends, Monitoring Price Levels