GigaCloud Technology (GCT) reported blowout Q2 results this morning. Indeed, driven by stronger-than-anticipated market demand for large parcel merchandise, revenues for the period rose 23.5% year-over-year to $153.1 million, which was $11.8 million (or 8%) better than expected. This outperformance was led by services revenue from GigaCloud 3P, which was up 31.9% to $43.3 million as 69.2% and 62.1% surges in last-mile delivery and warehouse services sales more than made up for a 61.8% drop in ocean transportation services sales resulting from the lower pass-through of ocean freight costs as shipping rates continued to decline. Product revenues from GigaCloud 1P and Off-platform E-commerce were also strong, with the former climbing 14.9% to $69.8 million on increased spending per active buyer and the latter surging 31.6% to $40.1 million driven by increased demand from certain third-party online selling sites. And thanks to the additional boost its margins received from the decline in ocean freight costs also more than making up for higher staff and delivery expenses, earnings tripled from 15 cents last year to 45 cents per share and beat the 37 cents analysts were projecting by an even wider margin of 8 cents (or 22%).

What’s more, this strong operating performance also led to the production of $18.3 million in free cash flow during the quarter. That represents a more than fourfold increase from the $4.1 million it generated in the prior-year period and allowed GCT to boost its already impressive net cash balance by another $18.2 million to $182.4 million. As a result, this massive cash load alone now represents $4.46 in cash per share or more than 45% of the current stock price.

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As for what lies 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 9.8% sequentially and 32.4% year-over-year to $607.5 million and the number of active 3P sellers (sellers other than GCT itself), active buyers and spend per active buyer were up 10.5%, 2.3% and 7.3% sequentially and 47.1%, 7.1% and 23.6% year-over-year to 665, 4,351 and $139,629, respectively. Based on this record trading activity that’s currently being conducted through the GigaCloud Marketplace, GCT believes it can achieve $162-167 million in revenue in Q3, which is substantially better than the $137.8 million analysts were projecting and points to continued strong top-line growth of at least 27%. Thus, I think today’s sell-off in GCT’s shares is being driven mostly by short-sighted profit-taking activity in a stock that’s more than deserving of the huge rebound it’s enjoyed over the past three months (and is being exacerbated by the overall market weakness) and expect them to resume their recent upward trajectory in short order.


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