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The Ratings Game: Global-e shares soar as upbeat analysts look to a future filled with cross-border commerce

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Even in the U.S. where the perception is that a shopper can find any item all the time, cross-border retail sales are strong, according to Amir Schlachet, chief executive of Global-e Online Ltd.

“In a lot of cases it’s not about what you need, it’s about what you want,” he told MarketWatch in an interview.

Shoppers find a brand that intrigues them or a special item, and they want to have it, even if the item has to travel thousands of miles to reach the buyers’ door.

Like many of the changes that have occurred in retail over recent years, social media and the internet are the reason for this change in consumer behavior.

“The uptick in social networks has changed the way people discover and shop brands,” he said, noting the impact of influencers, Instagram, Pinterest and other avenues for finding fresh new things to purchase.

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“Once they’ve got you hooked, they need to be able to seal the deal regardless of where you’re from or they’re from.”

Global-e
GLBE,
+10.00%

stock began trading on May 12, and while shares were slow out of the gate, they’ve since climbed higher than $38, up 8.3% in Monday trading. Upbeat analysts initiated the stock’s coverage with a look towards the future of international retail.

“The Global-e open SaaS platform is poised for sustained share gains in the
~$0.7 trillion cross-border e-commerce market,” wrote KeyBanc Capital Markets analysts led by Josh Beck.

Global-e’s revenue jumped to $136.4 million in 2020 from $65.9 million in 2019, according to the company’s prospectus. Gross merchandise value (GMV) reached $774 million in 2020, up from $382 million the year before.

Analysts praise what they call an “elegant software solution” that was built after Schlachet saw early on the “bottlenecks” in international online retail.

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“The platform is built on what we call an ‘Open SaaS 2.0’ architecture effectively acting as a ‘hub’ that interfaces with front-end/back-end systems and a suite of third parties (e.g., >95 3P APIs) that serves as a platform for launching x-border e-commerce operations such as language, payment (>150 payment options), duties/taxes, presentment, and fulfillment,” KeyBanc said.

KeyBanc also notes a relationship with Shopify
SHOP,
+1.75%

and “attractive” total addressable market.

KeyBanc rates Global-e stock overweight with a $42 price target.

Schlachet says it’s not just customers looking for unique items who turn to Global-e, but brands looking to have a local presence all over the world.

“In the old world, the solution to that was to have some kind of a channel – a local franchisee or retailer to bridge the gap with local know-how, infrastructure to fulfill, etc.,” he told MarketWatch.

But the internet brings the world to everyone’s computers and mobile devices.

“You don’t need an entire infrastructure,” he said.

And for companies trying to manage inventory, particularly luxury companies that keep inventory low, the ability to have one global inventory source creates efficiency.

Schlachet says Global-e has seen a diverse group of items, from jewelry to car parts sell on its site. Consumer electronics, which has a high number of regulations and consumer need for local expertise, is one of the categories that has lagged.

Over the past year in particular, when shopping went digital for a lot of consumers in the midst of COVID-19, there has been a “democratization of the free flow of goods,” though things like Brexit and U.S. sales tax changes have raised challenges,” Schlachet said.

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Raymond James initiated Global-e with an outperform stock rating and price target of $41.

“Given its role in enabling a number of secular tailwinds (e-commerce, cross-border, automation), we believe investors should invest in one of the fastest growing names in all of software,” wrote Raymond James analysts led by Brian Peterson.

“While experts project significant growth in cross-border trade, merchant/buyer complexity also remains an impediment to adoption. These dynamics have led to a structurally lower conversion on international selling efforts, with international shoppers representing 30% of traffic but only 5-10% of total monetization. Merchants using Global-e for cross-border commerce have been able to demonstrate substantial improvement on these figures, often times in a matter of months.”

Unlike retailers that started with a brick-and-mortar shop and made the move to online, Schlachet notes that many brands these days are digitally-native.

And companies with big-name backing, like Kim Kardashian’s Skims brand of underwear and shapewear, launch with a strong social media following.

“As soon as they start their own brand… it’s instantaneously global,” he said.

The Renaissance IPO ETF
IPO,
+2.08%

has slipped 3.2% for the year to date. The Amplify Online Retail ETF
IBUY,
+1.76%

has gained 7.5%. And the benchmark S&P 500 index
SPX,
-0.08%

is up 12.4% for the period.

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