Coupang IPO: Strategist says investors should consider profit outlook

JPMorgan Chase is an advertising partner of The Ascent, a Motley Fool company. South Korea has one of the highest population densities, with a large population living in large cities like Seoul. Coupang has been the leading e-commerce business and has numerous growth opportunities. Also, the company is ramping up monetization of its ads business.

Based on an average daily trading volume, of 6,640,000 shares, the short-interest ratio is currently 3.0 days. 6 Wall Street equities research analysts have issued “buy,” “hold,” and “sell” ratings for Coupang in the last year. There are currently 3 hold ratings and 3 buy ratings for the stock. The consensus among Wall Street equities research analysts is that investors should “moderate buy” CPNG shares.

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A lot of this loss can be attributed to its investments in food and grocery delivery, which management said are still losing money for Coupang. But with over $4 billion on its balance sheet post-IPO, Coupang has a long runway to invest for growth. With that cash, it can build out its technology, fulfillment, and all sorts of delivery services to better serve its customers. Revenue was up 71% in the period to $4.48 billion, marking the 15th consecutive quarter of 50% year-over-year revenue growth, showing how well Coupang’s model resonates with the South Korean population. Active customers grew 26% year over year to 17 million, and revenue per active customer grew 36% to $263.

Both of these segments are unprofitable at the moment, and will likely have low margins even at scale. However, what gives Coupang an advantage is that it uses its existing delivery and warehouse teams to investing to beat inflation power these segments. Coupang treats its employees well, giving drivers a five-day workweek and a minimum of 15 days off a year, which is better than the industry norm of just contracting out the work.

This bad week came on the heels of a 12.7% decline last week, so investors may be wondering if we are near a bottom. Currently, Coupang trades at $21.20, down 60% from its IPO price last March. IP has a low trailing price-earnings ratio of 8.5 and a high dividend yield of 5.4%. Consequently, as we look out to early 2024, Coupang could probably have enough steam left to end up delivering high teens or as much as 20% CAGR. And given that context, as we look ahead, this could be a very interesting stock, particularly given its improving profitability. As you can see above, all of Coupang’s tactics are clearly delivering more value to customers, with its latest active customer figures increasing by 10% y/y.

  • The company also offers Rocket Fresh, which offers fresh groceries; Coupang Eats, a restaurant ordering and delivery services; and Coupang Play, an online content streaming services, as well as advertising products.
  • Since then, CPNG shares have increased by 15.3% and is now trading at $16.96.
  • Here’s why you should buy shares of Coupang before the next bull market in technology stocks.
  • More value-oriented stocks tend to represent financial services, utilities, and energy stocks.

That’s pretty ugly, but it’s also good that Coupang raised money near the top of the growth stock surge early in 2021. After raising $4.6 billion, the company now has around $4 billion in cash as of the third quarter and very little debt. The current market cap is about $37.4 billion, just a little over two times trailing-12-month sales. That also seems like a fairly reasonable price to pay for this e-commerce retailer. Notably, revenues are accelerating, making Coupang one of the best e-commerce stocks to buy. Besides, the company has a considerable growth opportunity since it only holds a single-digit market share of total retail and grocery in the Korean market.

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There have been rumors that Coupang is going to move into other Asian markets, with job postings in places like Singapore, Taiwan, and Japan. When asked about it on the conference call, CEO Bom Kim declined to give any details but said it was something the company is planning on doing. With such a large opportunity to go after in South Korea, estimated by Coupang to be $500 billion a year how to buy crude oil by 2024, there is no need for Coupang to expand internationally yet. But with only 50 million people in South Korea, there is definitely a ceiling to how much spend can come from the nation alone. “Most of the other competitors really did not show any type of changes in terms of market share,” he said. Coupang’s rivals include eBay-owned Gmarket, WeMakePrice, Naver Shopping among others.

(CPNG) raised $3.4 billion in an IPO on Thursday, March 11th 2021. The company issued 120,000,000 shares at a price of $27.00-$30.00 per share. Goldman Sachs, Allen & Co., J.P.Morgan and Citigroup served as the underwriters for the IPO and HSBC, Deutsche Bank Securities, UBS Investment Bank, Mizuho Securities and CLSA were co-managers.

Investors may not be impressed by the favorable underlying trends yet because over the last year the stock has only returned 2.0% to shareholders. Given that, we’d look further into this stock in case it has more traits that could make it multiply in the long term. […] we reached another significant milestone this quarter, delivering in the trailing twelve months $2 billion of operating cash flow and over $1 billion of free cash flow. Yes, the business is performing slightly better than this on an FX-adjusted basis, with Q up 21% y/y. However, since its market cap is priced in USD, it’s more insightful to consider its underlying growth in terms of USD figures. Combine its cheap price and potential for growth, and Coupang is perhaps my favorite technology stock for investors to buy right now.

The company’s near-term strategy revolves around expanding its customer base and boosting profitability while prioritizing an exceptional customer experience. Coupang stands out in the competitive South Korean e-commerce landscape due to its innovative logistics network, enabling rapid delivery services. I often state that customer adoption curves are more important than revenue growth rates. Case in point, Coupang’s Q saw its active customers increase 10% y/y. Firstly, market share gains as a key revenue growth driver might not be so easy to achieve going forward. Coupang is now encountering stiffer competition, which could affect its future revenue growth.

Morningstar‘s Stock Analysis CPNG

Looking ahead, competition and regulatory issues are key factors which could result in a more moderate pace of revenue growth in the next five years. In consideration of these multiple factors, I decided that Coupang deserves a Neutral rating. “The fact is that (Coupang is) becoming the biggest e-commerce business within Korea and 24% market share, I think, it might actually even rise further,” Yoo said. “It is possible that they can actually gain as much as 30%+ over the next few years.” That, he explained, would justify why the company’s IPO price has increased. I think their mission statement rings true for a lot of their customers who probably can’t remember what life was like before Coupang.

Why Coupang Stock Cratered on Thursday

Volatility profiles based on trailing-three-year calculations of the standard deviation of service investment returns. On Wednesday, the consumer price index (CPI) for December was released, which showed inflation rising 7% over the prior year. Excluding food and energy, “core” CPI came in at a lower 5.5%. The overall CPI was the highest on record since 1982 and the core number was the highest since 1991. Then on Thursday, the producer price index figures for wholesale prices in the economy were released, showing a 9.7% rise over the previous year.

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This can tell us that the company has plenty of reinvestment opportunities that are able to generate higher returns. Additionally, Coupang is capitalizing on advertising opportunities, with its advertising business experiencing remarkable growth, potentially with high operating margins. Furthermore, recently Coupang’s advertising business has been a significant growth driver, outpacing its overall business expansion, by nearly twice the rate. Similar to Rocket Delivery, Rocket Fresh delivers fresh foods overnight. Users can receive the food by 7am if they order before midnight.[33] The service covers up to 8,500 kinds of foods.[34] It has saved time on grocery shopping and allowed social distancing to prevent COVID-19. Even though Coupang is seeing a profit inflection, its stock price is still in the doldrums.

You can already see Coupang Wats as the first extension of that. I can see them testing new business lines over time and becoming something more than just a company that’s focused on this back and forth e-commerce with customers. While the frequency will push up your total spend, the margin on all of that may decrease, because you are buying stuff that’s very small, because you’ve paid for the service.

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