GigaCloud Earnings Review (DW, Tariff Stuff Coming Soon and Possibly Thomas Crooks Pt. 2 if Things Continue to Worsen (joke(maybe)))

To preface, usually I try to keep these columns relatively clean language-wise (except for David Tepper-related articles) just because I think it’s often unnecessary, but it was necessary here.

It’s been a tumultuous 36 hours for me in terms of GigaCloud earnings. Yesterday, at 1:00 PM, I remembered that it was the day of GigaCloud earnings, and I quickly briefed myself, which included looking at my E*Trade portfolio and seeing that the stock was down 7% on the day. I prepared for the worst……..and I found it. The stock fell a further 17% after-hours, and I was saying some negative stuff about myself. Here is a synthesis:

“You stupid fuck. I CANNOT BELIEVE YOU JUST LOST A THIRD OF YOUR POSITION INVESTING LIKE A DUMBASS YOU MORON.”

I was frustrated because this was cataclysmic. The worst I have faced on a day is maybe a 15% hit from TQQQ, but that doesn’t sting too much because the volatility is expected, but this one stung. The stock fell, it kept falling, and it would not stop….after-hours. Probably a good thing that, as a rule, I don’t trade after-hours because I was about to pull the trigga. I waited till the morning, and the stock was able to make up a lot of ground, 16% on the day, but the stock is still down 15% over the past two days. Now, I’m left in a bit of an awkward spot, but I have reflected more on where I need to go from here, and at the end of this article, I will have a definite decision.

First, the context, I am down 21% total on the stock, which stings a lil, but is only half as bad as a particularly negative TQQQ experience. The stock is now only worth 11.5% of my portfolio, as it has obviously continued to shrink. I think that I’m somehow still outperforming the market despite the unending flow of shit spewing out of my GCT position, but I probably care about that too much.

Okay, now the company itself, and the earnings themself. And keep in mind that with a company with a market cap under $700 million, soon to be under $500 million, I’m sure, finding info can be tricky. I think there is literally one analyst covering this stock, so I’m doing my best to piece commentary outside of mine that introduces information worth including.

There was a lot of not great stuff, but there was also some decent stuff.

So, revenue growth was good, and annual growth numbers were great, pretty much exactly what you would want from a company of their size. Revenue finally surpassed a billy annually ($1.1), the firm finally integrated Noble House, a helpful addition to the E-Commerce platform, and Europe, specifically Germany, continues to grow as a hub for sales.

Bottom line was not spectacular. Net income actually declined by 6% to $31 million on the quarter, which tests my “I want to see revenue grow. Fuck the bottom line” outlook on life.

The thing is, revenue grew 65% y/y, in an increasingly aggressive international business environment, is pretty good, and I love bold revenue growth, especially in a company like this. Reaching a billion in revenue is almost entirely symbolic, but who cares? It’s still a thing. They even beat the Q4 revenue growth y/y estimates, by a small margin, but again, who cares? A beat is a beat, and 21% revenue growth in one quarter is what I want to see.

I particularly liked the service revenue growth. GigaCloud’s service sector is the sector of its business that handles managing a business’s shipping and method of receiving and exporting goods (there’s a word for it that I’m too tired to remember). Service revenue grew 76% y/y and 40% from the last quarter (WOWZAS). The margins were aight, about 20%, down 2.5% from the last quarter due to the price of shipping freight across the ocean.

Product revenue, the GigaCloud B2B marketplace, grew 64% on the year to a bit over $800 million, but only 13% in the quarter. I did find that latter number to be a bit worrying. Their explanation, that “timing of acquisitions, softening consumer demand, and challenges faced by some of [their] largest e-commerce retail partners” caused this stumble was quite dubious. They have not made any real acquisitions recently, “softening consumer demand” means nothing, and the last explanation is shit. I’m putting a pin in this.

CapEx did pick up in this most recent quarter, which I guess would be why their net income dried up, but this is more dubious reasoning. Why would CapEx need to pick up? I didn’t see anything worth anything mentioned in the earnings call. Second strike found.

Outlook was very negative, as GCT projected revenue that was quite negative, only +2.3% y/y. This revenue growth drop is due to “the planned contraction as GigaCloud executes Phase Three of its legacy Noble House integration plan.” That’s bullshit; fuck you. In my mind, this is strike three. The company’s shit earnings are not catching up to pretty great revenue, the revenue is catching falling down to the shit earnings. I need the topline growth to justify staying in this company, and I am not seeing it.

This is a rapidly darkening picture.

There are no immediate catalysts in the short-term to restart growth, and the company is too unstable to predict for the long-term or medium term. Sure, the company is super cheap, but who gives a fuck if the company sucks? The number one rule when investing is to always be in companies that are good companies, not shit companies with great valuations. Eventually, the valuation will catch up to the shittiness, and who has the time to play that game?

I do not think this company was a bad shot, and while I regret buying it obviously, I think it was a good bet.

In the morning, I will be selling the stock and buying more ServiceNow or ASML stock. Prayers up to all my fellow GCT investors. Sorry chumps, but I’m out this bih.