$GLBE Global-E Execution Risk

Investment Analysis Clubs Saul’s Investing Discussions
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I was reviewing Global-E’s numbers and I’m curious if any of you have any concerns with Global-E missing estimates / guiding poorly when they announce.

When you look at Lightspeed, Roku, Amazon, etc. They all announced supply chain problems that caused them to miss or lower guidance. Given that Global-E is in the logistics business, do you think there is any chance of execution risk?

Global-E guided for $56.3 M in Q3, Bear had noted that he expects 100%+ YoY, which would translate to $67 M, which would be a massive 20% beat which could be possible since they beat Q2 at 17%. However, how realistic is that given ecommerce definitely slowed in Q3 as we saw with the behemoths and other major retailers plus supply chain issues are causing a lot of merchants to spend less on advertising/sell less goods.

Given LightSpeed’s implosion and the market’s lashing of companies that show signs of slowing down and the massive valuation Global-E, it seems like it’s a short-leash and any sign of weakness could result in a 20%+ drawdown.

Given the uncertainty, I’m tempted to trim since this is a newer public company and doesn’t have a huge track record and we’re facing some pretty unprecedented times.

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I surely understand your concern. I don’t think they will fail their guidance, but it might be lower than 100%YoY. But I feel like the market already priced it in. It’s already in a downtrend from the ATH (decreased by >30% already). If you sell now, if GLBE somehow matches the lower expectation or surpasses it, you might end up selling at the bottom. I’m holding GLBE (only 1%) and decided to keep it there until the earning. I think this company is a long-term play, so we might have to be patient.

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Also remember their lock-up expiration date is, I believe, Monday, November 8th, the day before earnings. That’s probably why we’re seeing weakness lately.

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RunnerGuy,

As I think I’ve posted before, I got into GLBE at their IPO with my first tranche at $24.35. I continued to buy all the way up, ending up with an average of $47/share. I sold out last month–here’s why.

I was also long SNAP. I did not see their problems coming (supply chain and Apple’s privacy cutting ad revenue), and I was unable to be near my account when earnings dropped the stock 27%. I sold at a big loss as the macro problems came into view. The ripples of the supply chain issues moving into companies cutting back on advertising combined with the regulatory and anti-trust issues around social media and companies like Apple was a huge wake up call for me. And that’s before you hit the various geopolitical risks.

  1. The future of social media is moving to social commerce and commerce has been adding social elements. They are beginning to rise and fall together. Supply chain issues are affecting the commerce side and misdeeds by Facebook will result in regulation and a more difficult climate for the social side. Privacy concerns will have more companies protecting data, as Apple has. Predatory behavior like Apple’s enormous 30% take from apps in their app store will keep some instability in those disruptors trying to break the stranglehold (e.g. ROKU or the gaming companies like Epic who have sued them).

  2. One can argue that the supply chain issues are temporary. I would respond that they are temporary for those issues caused by the pandemic. But in a world with a deteriorating climate, natural disasters are on the rise as are (and will be) global tensions. And, at least in the US, the labor issues surrounding transportation also are not going away any time soon. Right now warehouses are incentivized to keep the stagnation, so they can charge extra storage fees. Truckers, who are mostly paid by the delivery, not the hours, have no interest in waiting 8 hours just to enter a port to pick up a container. And on it goes. It’s a flywheel of a very bad sort for the supply chain.

The implications of all of that together made me get out of everything that was even remotely adjacent to the need for material goods–social media, Ad-tech, streaming, and logistics. I let go of SHOP (which may be a mistake). And I got out of GLBE, especially given the logistical portion of their business. I even dumped Sprout Social (SPT), which I brought to this board and which just had a good ER. I might have panic-sold too much and may get back into some down the road, but I needed to insulate myself until I could think it all through.

The issues I saw in SNAP’s fall further confirmed and, for me, refined Saul’s thesis that SaaS companies (or Fintech companies like UPST) are the best companies to invest in. We know they’re better because they have recurring revenue and much higher margins than companies involved in physical goods. But I now see the risk in physical goods and their transport as being more than just lower margins. I see it stretching into some companies that might be SaaS but where the software they provide as a service is sold primarily to companies that move material goods.

When I pull on those threads, it makes my brain hurt. What happens to a global economy based on the exchange of goods and services, when the exchange of goods suddenly slows to a crawl? How many of those services are still needed? Which are most affected?

One thing I know. People and businesses will need loans and options to pay for what goods they can get over time. Everyone needs cybersecurity. Data management and work teams are needed for countless businesses not involved in the manufacture, distribution, or sale of physical goods. Communication is essential. I’m watching advertising from the sidelines. But I’m thinking through the connections with new eyes since the afternoon SNAP hurt my bottom line.

The one area requiring physical goods I still hold is in the semis. Thank goodness I was still in NVDA yesterday and AMD has also done well for me. They will power whatever is left.

Most of our companies are disruptors in important and major industries. So disruption is coming up from the grassroots. Disruption is also coming down from the macro trends in geopolitics, civil unrest, and, literally, the planet. I expect it will take all the brilliant minds on this wonderful board to navigate these waters with success.

JabbokRiver

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Jabbo: You wrote that in the last hour? Impressive.

It really brings home that the world is going virtual. Physical goods will be needed, but more and more of this world’s business will be conducted virtually. As you say, with climate deterioration, just think how necessary it will be to be companies that operate in the cloud? And violence will come with increased scarcity, another reason to do things virtually. It’s a scary, dystopian hypothesis, but who would think we’d be hit with a global pandemic that would shake the world to its core in a matter of months?

Cyber Security? Check.
Fintech? Check.
Metaverse? Check. Entertainment is going indoors, too. I got Oculus Quest Virtual Reality headset during the pandemic for my family and it saved us. I hate FB as a company so would not invest in them, but Unity is the bones of that world, and RBLX seems to be the gaming platform that maximizes the Ready Player One mentality.

World is changing. We’d better get used to it.

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I sold GLBE for the same reasons. I also am interested in the changes away from physical goods and services that you discuss. With the metaverse these trends appear to be accelerating. In fact, the CEO of NVDA has stated that the metaverse could outpace the current global economy!

Many of us have benefited by holding shares of companies that are themselves growing and profiting by employing these intelligent machines and business models.

What keeps me up at night is when do we, the individual stock pickers, get disrupted by these marvelous machines?

Obviously, the machines are not good enough at picking growth stocks just yet! If you look at our returns over recent years, we humans can still spot the growth patterns that are profitable better that the current machines. However, the machines will be better than us, eventually. Perhaps, sooner than we think.

Just as Upstart’s AI is making lending more efficient, so too will AI make stock markets more efficient. Less error makes less chance for human “brilliant minds” to benefit. As Putin has said, the people with the best AI will rule the world. These machines seem very important and profitable to own going into the future, especially when they disrupt the glory days of the individual investor!

Enjoy these glorious days while you can!

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FallingWallenda,

I totally agree that the Metaverse is on the horizon if not already here in its infancy. That’s the root of the NFT craze. I used to own both U and RBLX. You’ll note that I’m easily terrified, but I got scared out of both when I read a deep dive on the financial problems Roblox was hitting due to Apple’s chokehold on the apps and games available through its store.

I wish I could find the article now, but the essence was pointing out that it’s not that Apple gets a one-time 30% cut. It is constant. When you play a game from the app store, you play it THROUGH the app store and they get that 30% cut of everything, all the time. Since Roblox is also paying out to its developers, there ends up being very little left for the company. That is the root of the lawsuit against Apple from Epic Games (Fortnite).

Unity (U) is definitely the bones, and they are solid bones. And the stock has done much better since I sold it (you’re welcome). But I decided to throw the chips from both into a starter position in ironSource (IS), that just went public via a SPAC in late June. They help developers build games, apps, and whatever else with Unity or other engines. But their primary offering is a platform to help those developers take what they create to market and build a business. As they say, “One platform to turn your app into a business.” https://www.is.com/. It’s yet another Israeli company. They report on Wednesday morning, so I may be out by Wed afternoon, but the more services can be bundled together in a platform, the more I like it.

Wishyouwell,

When do individual stock pickers get disrupted? One could argue that we already are disrupted, since automated trades already make it nearly impossible to get the best prices–either when we get in or when we get out.

AI will take over picking by the numbers. AI is built for that. But it isn’t just numbers that make a business successful. Just like there is always a role for human intelligence in our Intelligence Agencies, so I think there will always be a role for humans to piece together the data points that make for a great company.

There is a company I held for awhile called Schrödinger (SDGR). It’s in the healthcare sector. The problem it’s trying to solve is the issue pharmaceutical researchers have in finding promising drugs to test. It’s a needle in a haystack problem and with a long time to test a drug adequately, the failure rate is high. SDGR uses AI to run through thousands of potentially useful drugs, pulling out only the ones with real promise. Those are then sold to researchers.

I think the equivalent of a Schrödinger for companies, especially micro caps, would be an amazing gift. Then humans can take the numbers and maybe other data points and do what humans do best in a comprehensive evaluation of every aspect of the business, its management and culture, societal and global trends, and the idiosyncrasies of human behavior to suss out the Upstarts of the world. And the more humans trying to get at that together, the better the result will be.

JR

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I’m still excited about Roblox. Revenues are expected to grow over 163% YOY this quarter, and they are making incredible partnership deals with big brands (Chipotle) and integrating the hottest content (Squid Games) onto their highly addictive platform. Unlike Pinterest, their user base is growing. Last figures were 48.2 million users, up 32% since last year. Facebook is obviously a big competitor, but I would think they would buy Roblox rather than try to create something comparable from scratch.

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