Stellar Q3 Results And Q4 Projections Signal Bullish Future For GigaCloud Technology (GCT)

GigaCloud Technology (GCT) delivered another outstanding quarter. Indeed, driven by stronger-than-anticipated market demand for large parcel merchandise, Q3 revenues surged 39.2% year-over-year to $178.2 million, which was $14.4 million (or 9%) better than expected. This outperformance was led by product revenue from Off-platform E-commerce, which saw a substantial increase of 58.0% to $46.3 million thanks to heightened demand from select third-party online selling sites.

Product revenue from GigaCloud 1P and services revenue from GigaCloud 3P also exhibited strength, with the former climbing 38.1% to $80.4 million on increased spending per active buyer and the latter higher by 27.2% to $51.5 million as 63.5% and 23.4% surges in last-mile delivery and warehouse services sales more than made up for a 49.5% drop in ocean transportation services sales resulting from the lower pass-through of ocean freight costs as shipping rates continued to decline. Together with a reduction in its effective tax rate from 75.0% to 18.8%, these gains also outweighed higher product, rent, staff and delivery expenses, and propelled earnings per share from a penny last year to 59 cents, beating the 38 cents analysts were projecting by an even wider margin of 55%.

What’s more, this strong operating performance also led to the production of $43.4 million in free cash flow during the quarter. That represents a 30.9% increase from the $33.2 million it generated in the prior-year period and allowed GCT to boost its already impressive net cash balance by another $32.5 million to $214.9 million. And even after subsequently shelling out $85 million to acquire home furnishings maker Noble House Home Furnishings LLC on November 1 and another $10 million to buy cloud-based interactive digital signage and e-catalog management SaaS solutions provider Wondersign on November 16, the company should still be sitting on a massive cash load of about $120 million, which represents $2.93 in cash per share or more than 20% of the current stock price.

Furthermore, this money appears to have been well spent with Noble House significantly expanding GCT’s warehouse network, introducing new sourcing from India, and establishing relationships with top retailers such as Amazon, Target and Walmart, all of which enhance the ability of its sellers to reach their target customers. The additional supplier diversity and sourcing coverage also strengthens its supply chain while broadening its product offerings in the 1P space.

In addition, GCT plans to extend its presence in the physical retail sector by leveraging Wondersign’s established network of over 2,500 retail locations to distribute its new GIGA IQ package. This will allow consumers to explore, select and purchase the company’s diverse product offerings through these retail partners—with the goal of transitioning its marketplace into an intuitive end user-oriented platform.

Looking ahead, GCT stated that the total gross merchandise value (GMV) of transactions ordered through its GigaCloud Marketplace in the past twelve months was higher by 12.7% sequentially and 40.8% year-over-year to $684.8 million and the number of active 3P sellers (sellers other than GCT itself), active buyers and spend per active buyer were up 11.4%, 5.8% and 6.6% sequentially and 43.3%, 9.6% and 28.5% year-over-year to 741, 4,602 and $148,793, respectively. Based on this record trading activity that’s currently being conducted through the GigaCloud Marketplace and the boost it expects from the acquisitions, GCT believes it can achieve revenues of $217-223 million in Q4, which is substantially better than the $155.1 million consensus forecast and points to continued strong top-line growth of at least 72% to close out the year. Given these continually improving prospects, I believe the stock’s post-earnings momentum can endure.