GCT stock is down, but revenue is expected to grow over 50% this year.
GigaCloud Technology (GCT) stock has skyrocketed 236.7% in the past year, but its recent 35.1% fall from its 52-week high could make it cheaper for investors with a high risk tolerance:
GCT provides B2B e-commerce solutions for cumbersome products like furniture, home appliances, fitness equipment, etc., in the United States and internationally through its GigaCloud Marketplace.
The marketplace connects manufacturers primarily in Asia with resellers in the United States, Asia, and Europe and helps with all aspects of e-commerce, like product discovery, payments, and logistics.
Today, analysts give $GCT a consensus price target of $52.57, implying that there’s currently a 78.6% upside for shares to reach fair value.
What’s the outlook for GCT stock?
GCT saw high annual revenue growth of 43.6% for 2023.
Analysts expect the company to see 56.1% revenue growth in 2024 and 22.8% growth in 2025:
This company is profitable, despite IPO’ing in August 2022.
The company saw gross margins of 26.8% and operating margins of 16.1% in 2023, and Wall Street analysts expect those margins to stay about the same over the next few years.
GCT saw a staggering 96.5% year-over-year revenue growth in Q1 of this year and will release its second-quarter results on August 6th, where analysts expect 79.9% revenue growth from the previous year.
See GCT’s full analyst estimates >>>
Is GCT safe?
GigaCloud has strong financial safety, with a healthy Net Debt/EBITDA and an extremely high interest coverage ratio of 91.4x.
Additionally, since this company is growing rapidly, investors might be concerned about whether the company is cash flow positive or burning cash.
The good news is that GCT has strong earnings quality, so the net income the company makes is backed by real cash.
We check this by seeing if a company’s cash from operations exceeds its net income plus depreciation and amortization because that means the company earns real cash for its earnings instead of just having earnings on paper or other financial fluff.
GCT has a strong cash balance as well as strong cash from operations:
Check out GCT’s full balance sheet analysis >>>
Should investors be concerned that GCT is a Chinese company?
In short, yes.
GigaCloud Technology Inc is a holding company incorporated in the Cayman Islands and not a direct Chinese or Hong Kong operating company. As a holding company with no material operations of its own, GigaCloud Technology Inc conducts its operations through its principal subsidiaries incorporated in mainland China, Hong Kong, Japan and the United States and principal consolidated VIEs incorporated in the United States and the United Kingdom.
– SEC Filing
As this SEC filing explains, GigaCloud does operate in mainland China.
Delisting threats, worsening US-China relations, and auditing standards can make it very difficult for investors to trust Chinese companies. Investing in Chinese companies carries considerable risk.
In May, Grizzly Research published a short report on GigaCloud Technology. GigaCloud responded within a day with this press release.
In July, GigaCloud joined the Russell 2000 Index, which tracks the 2,000 smallest companies in the Russell 3000 index. The Russell 3000 tracks 3000 of the largest US companies.
No one knows for sure what the future will bring for Chinese companies on American exchanges, so it probably only makes sense for investors with a strong risk appetite to consider GCT.
Is GCT a buy?
GCT is growing like crazy, but it carries substantial risks as a Chinese company. So, do the potential returns outweigh the risks?
Today, analysts give GCT a consensus price target of $52.57. With GCT trading around $28 per share, this implies a 78.6% upside for shares to reach fair value.
These consensus estimates are aggregated by Wall Street’s sell-side analyst estimates, meaning they’re estimates made by real people. Of course, analysts get estimates wrong all the time, but checking out the analyst estimates is still a good place to start to see if a stock might be undervalued.
Over the past year, GCT has had an average upside of 54.6% based on analysts’ price targets.
The graph below shows analysts’ price targets (blue line) vs GCT’s stock price (black line) over the past year:
From the graph, it’s clear that analysts saw upside before, and they see upside again.
You might be wondering:
“Is the company actually trading at a discount? Or are future revenue growth expectations already factored into the share price?”
For this, we’ll look at the company’s NTM EV/Revenue.
The NTM EV/Revenue multiple looks at a company’s current enterprise value, which is the total capital invested in the business (Market Cap + Total Debt – Cash), and is divided by analysts’ consensus estimates for the company’s next twelve months’ revenue.
Basically, NTM EV/Revenue takes the business’s total value and divides it by expected revenue for the next 12 months. GCT is trading 58.3% above its all-time average of 0.79x. This suggests GCT could be overvalued:
Check out $GCT’s full valuation analysis >>>
The Takeaway
GigaCloud Technology is growing like crazy, and analysts see 79% upside in the stock.
But, this is a company that operates in mainland China, which poses risks for investors.
GCT probably only makes sense for investors with an extremely high risk tolerance who see upside.
The TIKR Terminal offers industry-leading financial data on $GCT and over 100,000 other stocks.
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Disclaimer:
Please note that the articles on TIKR are not intended to serve as investment or financial advice from TIKR or our content team, nor are they recommendations to buy or sell any stocks. We create our content based on TIKR Terminal’s investment data and analysts’ estimates. We aim to provide informative and engaging analysis to help empower individuals to make their own investment decisions. Neither TIKR nor our authors hold any positions in the stocks mentioned in this article. Thank you for reading, and happy investing!
