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Motley Fool Issues Rare “All In” Buy Alert
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The stock market doesn’t look so exciting for investors these days. The S&P 500 remains 17% lower than when the year started although that’s up from its lows of the year.
Investing today requires some confidence and a long-term outlook. One strategy for investing in the down market is to find stocks at dirt cheap prices backed by companies that have loads of potential. If you have $1,000 available to invest after paying off debts and establishing an emergency fund, you can find some great deals today.
Global-e Online (GLBE 2.52%), Revolve Group (RVLV -2.50%), and Floor & Decor Holdings (FND -1.52%) look like solid contenders for stocks that could strongly grow your money.
Global-e Online might be the best e-commerce stock you’ve never heard of yet. It markets cross-border commerce solutions for e-commerce retailers focused around payments and shipping, and it’s growing like a weed.
Even in difficult times, like now, it has an edge over other e-commerce companies because of its business-to-business model. E-commerce retailers are feverishly trying to maintain and grow sales amid a hostile market environment, and Global-e’s services help make that happen. Companies can integrate Global-e’s technology into their websites to easily offer their products in more than 200 countries and 100 currencies, providing access to millions of new customers.
Global-e has been able to add many high-profile customers to its client roster, including big names like Walt Disney and Mattel as well as expanded deals with European fashion powerhouse LVMH. It also integrates into Shopify (SHOP 1.72%) stores, and Shopify is a large investor in the company. These are huge growth levers for Global-e as it racks up clients and expands services for others.
Global-e demonstrated robust growth again in the third quarter, posting sales of $105.6 million, up 79% from last year. Adjusted EBITDA of $12.5 million was 62% higher. The company’s net loss, however, widened from $28.5 million to $64.6 million. Revenue easily topped Wall Street’s expectations, but the loss per share of $0.41 came in well below the expected $0.30.
Global-e stock tanked after the report, and it’s now down 69% this year. The good news is that it’s a great opportunity to buy shares.
The losses are due to a combination of factors: amortization of warrants related to the investment from Shopify, expenses related to Global-e’s acquisition of Borderfree, and increases in other expenses related to growing the company. With Borderfree firmly integrated into Global-e and with the Shopify warrants now fully amortized, the company should see higher sales and profitability as it scales.
With new clients, and those clients deriving benefit from their packages in the form of higher sales, Global-e’s growth prospects look compelling.
If you’re not a millennial or Gen Z shopper, you might not have heard of Revolve Group. But don’t let that stop you from buying its stock.
Revolve operates a web presence targeting young and tech-savvy customers. It leverages social media influencers to hype up its products, including celebrities with huge followings. Artificial intelligence plays a major role in all of its operations, and since it’s all online, the retailer can easily swap products in and out if they are or aren’t resonating with its customer base.
This typically results in a high full-price sales rate and robust profitability, and the company has been posting strong sales growth for a long time. However, that’s been changing in the pressured economy.
Sales in the third quarter increased 10% over last year, a deceleration from soaring growth last year. Profits fell from $16.7 million to $12 million. However, on a brighter note Revolve saw a 34% year-over-year increase in active customers and a 16% increase in average order value. And in an indication of efficient cash management, free cash flow increased more than 500% to $8.6 million.
Revolve is in tune with its core customer base, and these shoppers are remaining loyal even under pressure. It has the technology to stay current, and a differentiated model that leads to growth and profitability. Plus, it’s a founder-led company, and management is invested in furthering the model and expanding to new product areas and increased engagement.
Revolve stock is down 54% in 2022, and shares trade at 25 times trailing-12-month earnings. Considering the many growth levers here, as well as the reasonably priced stock, Revolve stock has the potential to be a high gainer.
Floor & Decor is a recent Buffett addition to the Berkshire Hathaway portfolio, and it’s not hard to see why he finds this furniture company appealing. It’s a warehouse retailer for everything flooring related, and it has carved out a niche that customers are finding compelling.
That has led to high growth. In the third quarter, revenue increased 25% over last year, including a 12% increase in comparable-store sales (comps). It even managed to eke out a 3% increase in earnings per share (EPS) to $0.71.
Management sees an opportunity to reach a total of 500 stores over the next 8 to 10 years, up from an expected 191 at the end of 2022. Considering the chain’s popularity and small current store count, as well as growing comps, it’s easy to envision this becoming a reality. Revenue and profits should rise accordingly, and the stock price should follow.
Floor & Decor stock fell after the third-quarter earnings report as management lowered its full-year guidance. Third-quarter EPS handily beat analyst expectations, with sales coming in as expected, but the lowered guidance came in below what analysts were expecting and indicates a slowdown in the fourth quarter.
The stock is down 44% this year, and shares trade at just under 30 times trailing-12-month earnings. But with so much growth potential, and being profitable to boot, this company should reward investors many times over.
Jennifer Saibil has positions in Global-e Online Ltd. and Walt Disney. The Motley Fool has positions in and recommends Berkshire Hathaway (B shares), Global-e Online Ltd., Revolve Group Inc, Shopify, and Walt Disney. The Motley Fool recommends the following options: long January 2023 $1,140 calls on Shopify, long January 2023 $200 calls on Berkshire Hathaway (B shares), long January 2024 $145 calls on Walt Disney, short January 2023 $1,160 calls on Shopify, short January 2023 $200 puts on Berkshire Hathaway (B shares), short January 2023 $265 calls on Berkshire Hathaway (B shares), and short January 2024 $155 calls on Walt Disney. The Motley Fool has a disclosure policy.
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