GigaCloud Technology: Fast growth and an early opportunity

Quick, which technology stock boasts a one-year gain of 272%, and analysts are expecting to post a triple-digit earnings increase when it wraps up its most recent fiscal year?

You might have guessed Nvidia Corp. NASDAQ: NVDA, which had a spectacular run in 2023 but has posted a gain of 229% on a one-year basis. 

But small-cap, newly public GigaCloud Technology NASDAQ: GCT has been on a tear, and a momentary pause may offer a buy opportunity.

GigaCloud also falls into the category of stocks that you could categorize as “early opportunities.” It's a young, small company based in Hong Kong that indexes or exchange-traded funds have not yet tracked. 

Companies like that are still undiscovered by the broad market and appear to be in the early phases of their growth trajectories. 

Profiting from specialized markets

You often hear the phrase "the riches are in the niches,” which applies to GigaCloud’s business model.

The company specializes in e-commerce solutions for business-to-business shipping large parcel merchandise, such as furniture, home appliances and fitness equipment. 

In particular, it moves those big and bulky items from manufacturers' or sellers' facilities to retailers. GigaCloud's logistics network includes warehouses throughout the U.S., Germany, Japan and the U.K.

GigaCloud runs 24 warehouses around the world. In addition to using those for its shipping and transport operations, it also rents warehouse space to resellers. 

The company was founded in Hong Kong in 2006 and recently expanded its U.S. footprint in several ways.

First, it went public on the Nasdaq in August 2022, just as the entire market, including the iShares Russell 2000 ETF NYSEARCA: IWM small-cap index, was turning lower.

The energy of youth

The GigaCloud Technology chart shows the post-IPO decline and the recent rally. 

Fairly recent IPOs are often among the market's biggest gainers, as has been the case with GigaCloud.

Second, after its IPO, GigaCloud expanded its services to the entire contiguous U.S. by partnering with a "last-mile" delivery service. 

That was inauspicious timing, and although most stocks will get dragged lower in a broad downturn, GigaCloud has some things going for it that are drawing investors' attention. 

It's been growing through acquisition recently, and analysts expect GigaCloud to report earnings of $1.97 a share when it delivers full-year 2023 and fourth-quarter results, likely sometime in late February.

In 2024, analysts see the company earning $2.28 a share, an increase of 16%.

Double-digit revenue growth

Revenue has been growing at double-digit rates in the past eight quarters. Its three-year revenue growth rate is a very healthy 30%.

GigaCloud has a market capitalization of $816 million, so it's still very small. It can be lucrative to invest in small-cap stocks, but there's a bit of buyer beware: Smaller stocks can be less liquid and more volatile.

For example, GigaCloud has a beta of 1.12, meaning it's 12% more volatile than the broader market. If the market moves up or down by 1%, GigaCloud stock should move by 1.12%.

Smaller float can mean bigger volatility

It's not uncommon for smaller companies to be more volatile than the broader market. 

A big reason for that is the small number of shares in the float relative to bigger companies. 

A small float or limited number of shares available for trading can increase a stock's volatility because it takes fewer transactions to impact the price. Here's a way to picture that: With a mega-stock like Nvidia, about 2.4 billion shares are changing hands. 

That means if you want to buy at a particular price, it's pretty likely you'll get it (within a few pennies, anyway).

But GigaCloud has only 8.8 million shares available to the public. That makes it more tricky to get exactly the price you want, so traders and investors need to have a bit of a "close enough" mindset when buying and selling.