GigaCloud (GCT) stock price is in a deep bear market: buy the dip?

By:
on Mar 28, 2024
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  • GigaCloud stock has surged by over 377% in the past 12 months.
  • The company is growing at a fast pace as global trade rebounds.
  • The stock has retreated by over 42% from its highest point this month.

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GigaCloud Technology (NASDAQ: GCT) stock price has suffered a harsh reversal, a few days after it surged to a high of $45.16. It plummeted to $25 on Wednesday, a 42% crash from its highest point this year. So, is it still safe to buy GigaCloud shares?

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Post-earnings momentum fades

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GigaCloud Technology is a major company that is often misunderstood for a good reason. Its name suggests that it is a company in the cloud computing industry, which partially explains why it has risen by almost 400% in the past 12 months.

Far from it, GigaCloud Technology is a company in the technology industry that makes it easy for companies to do global trade easily. It runs a marketplace where customers, say in the US, can buy products from Asian countries. 

As a result, the company has several ways of making money, with the most obvious one being the transaction costs for every sale it implements in its ecosystem. The company also offers other solutions like warehousing.

GigaCloud has slowly become one of the fastest-growing companies as its brand has become well-known among traders. Its annual revenue jumped from $122 million in 2019 to over $703 million in 2023. It has also become a highly profitable company as its net profit jumped from $2.9 million to $94.1 million.

The most recent results showed that GigaCloud’s business continued to thrive in Q4. Its total revenue rose by 94.8% YoY to $244.7 million. Most of these numbers – $87 million – came from its off-platform e-commerce. It was followed by GigaCloud 1P and GigaCloud 3P, which brought in $88.3 million and $69.3 million. 

GigaCloud’s business is doing well at a time when global trade is facing numerous headwinds. The recent bridge accident in Baltimore could have an impact on global trade. It is also having some challenges in the Panama Canal and the Red Sea. Oil prices are rising, which could have an impact on freight rates.

However, I suspect that the company will continue to do well in the coming months as inflation continues to fall. Lower inflation could lead to more purchases from the United States. 

There are signs that GigaCloud is also attractive in terms of valuation and revenue growth. The only analyst covering the stock estimates that its revenue will jump to $1.1 billion this year and $1.35 billion in 2025. Its earnings per share is also expected to move from $2.59 this year to $3.38 in 2025.

GigaCloud estimates

GigaCloud Technology stock price forecast

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GigaCloud stock

GCT chart by TradingView

A quick look at the daily chart explains why the GCT stock price has tumbled recently. Technically, the stock formed a double-top pattern at $43.50. The neckline of this pattern was at $30.6. In most periods, this is one of the most popular bearish signs in the market.

GigaCloud share price still sits above the 200-day Exponential Moving Average (EMA), which is a positive sign. The Relative Strength Index (RSI) has retreated below the neutral point of 50. 

Therefore, I suspect that the stock will retreat to the 200-day moving average at $20 and then resume the bullish trend. In the long term, I believe that the stock will rebound and retest its YTD high of $45.

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