1 Are the most popular ecommerce stocks a better buy than Shopify?

global-e online (GLBE 2.82%) He has continued his hot streak. The small e-commerce service provider comfortably beat its own financial forecasts once again during its second-quarter earnings update.

Up to this point, I have rejected Global-e because buy (TRADE 0.14%) It’s a shareholder and key service integration partner, so my involvement with Shopify also brings some ancillary exposure to Global-e. But after a post-earnings sell-off, the smaller software provider looks intriguing.

Increase year-round guidance to profitable growth

Global-e is a suite of software services for businesses that sell online and specifically for those that want to sell outside of their home country. The company offers services like website customization (including currency exchange and payment acceptance) for specific countries, shipping and logistics integration, taxes, and the like. Its software integrates with Shopify, where it will soon launch Shopify Markets Pro for cross-border e-commerce, and with metaplatforms Shops for Facebook and Instagram.

Successes have been achieved quarter after quarter since Global-e’s initial public offering (IPO) in 2021, as merchants, especially high-end fashion and apparel suppliers, look to build relationships with customers around the world. world. This appeared in the last quarterly update.

Q2 2023 gross merchandise value (GMV) sold through Global-e, which is the basis of how the company is paid, increased 54% year-over-year to $825 million. The resulting revenue increased 53% to $133 million. Both metrics easily exceeded management’s forecasts of three months ago.

Better still, though Global-e is small, it is making rapid progress in profitability. Its adjusted earnings before interest, taxes, depreciation and amortization (EBITDA) was $21 million in the second quarter against an outlook of up to $18 million. It still has some work to do to reach profitability according to GAAP, given its $36 million net loss last quarter, most of which is related to the investment deal with Shopify last quarter. Couple of years. Free cash flow was positive at $18 million.

YCharts data. Free cash flow of the last 12 months.

Given the excellent second quarter, management also once again raised its full-year 2023 outlook. Revenue is now expected to fall in the range of $570 million to $596 million (previously $562 million to $590 million), approximately 43%. more than in 2022. A slowdown is looming, but it looks like Global-e will grow at a still healthy pace of more than 30% in the second half of this year.

A better deal than Shopify right now?

I would highlight here that if you already own Shopify stock, you will gain a stake in Global-e because of the warrants (exercisable on shares) that Shopify owns in the smaller software team. Given Global-e’s diminutive size and its reliance on Shopify and Meta for distribution to e-commerce merchants, you’ll likely decide that owning a few Shopify shares (or even Meta shares) is good enough and stop investing in it. Global-e directly.

However, if you’re looking for a top ecommerce software growth stock, perhaps Global-e is a better choice right now than Shopify. It’s true that both companies are still climbing towards profitability, but at this particular juncture, it’s the much smaller Global-e that is generating better free cash flow margins…at least for now.

YCharts data.

Additionally, Shopify’s stock is trading at 11.3 times last 12-month sales and is forecasting low 20% revenue growth next quarter. Global-e is trading at only a slight premium to that, 12.7 times final sales, but forecasts low 30% growth next quarter.

Given this information, Global-e seems to be the best option at the moment. If you’ve been watching the company, financial progress has been steady and it seems to lend weight to the merits of Global-e’s software. If you do decide to buy, remember to take it easy and be prudent as this is a very small company that is heavily reliant on larger peers. Consider using a very small dollar cost average plan if you purchase it.