Coupang, Inc. (CPNG): Navigating Mixed Signals in South Korea’s E-Commerce Landscape

Overview of Coupang, Inc. (CPNG)

Coupang, Inc., CPNG, founded by former Harvard Business School student Bom Kim in 2010, has quickly developed into South Korea’s leading e-commerce player. It is often described as the “Amazon of South Korea.” The stock of CPNG advanced 46.5% over the past nine months and 42.1% year-to-date, finishing the last trading session at $23.

Still, the question lingers in investors’ minds: can it continue its uptrend momentum?

Mixed signals have begun showing up in Coupang’s recently released financials. Second-quarter revenue came in at $7.32 billion, slightly shy of the expected $7.39 billion, but on the bright side, adjusted earnings per share of $0.07 easily beat the break-even expectation and was a $0.07 surprise.

“This quarter, we continued to see deeper levels of engagement from our customers, powered by our relentless focus on providing even greater levels of selection, service, and savings for customers,” said CPNG’s CFO Gaurav Anand.

Let us go over factors that may impact CPNG’s performance during the following periods.

South Korea’s E-Commerce

Mixed Financials

In the second quarter of 2024, which closed on June 30, CPNG’s net revenue grew year-over-year by 25% or 18% excluding the impact of Farfetch to $7.32 billion. Meanwhile, Product Commerce Active Customers grew by 12% to 21.7 million, while revenue per active customer grew by 5% on a constant currency basis.

In addition, gross profit advanced 41% year-over-year to $2.14 billion; gross margin reached 29.3%. Adjusted EBITDA of CPNG increased 10% from the year-ago value, reaching $330 million.

However, the company has seen its operating loss swing to $25 million versus prior year’s quarter, which posted an operating income of $148 million. Moreover, its adjusted attributable net income decreased by 14.5% year-over-year to $124 million. Also, adjusted earnings per share came in at $0.07, down 12.5% year-over-year. CPNG’s cash outflow from operating activities declined 33.7% year-over-year to $876 million.

Analysts’ Estimates Mixed

Those analysts who polled the revenue for Q3, ending September 2024, estimated it to grow by 24.8% from the prior year’s figure of $6.2 billion, to $7.72 billion. The consensus EPS estimate, however, for the same period shows an estimated decline of 77.7% from the prior year’s figure of $0.045, to $0.01.

Consensus Revenue Estimates

Analysts polled estimated CPNG’s revenue to grow 24.4% from the prior year’s figure of $24.45 billion to $30.34 billion for the fiscal year ending December 2024. Its EPS for the current year is estimated to be negative at $0.01.

Overvalued Valuation

If analyzed through forward EV/Sales, CPNG is trading at 1.30x which is 7.6% above the industry average of 1.21x. Similarly, its forward Price/Sales of 1.36x is 56.8% higher above the industry average of 0.87x. Also, compared to the industry averages of 9.76 and 14.24, the stock’s forward EV/EBITDA and EV/EBIT multiple is at 40.75 and 88.76 respectively.

Mixed Profitability

CPNG’s trailing-12-month ROCE and ROTA of 31.73% and 6.92% are 175.8% and 69.9% higher than their respective industry averages of 11.50% and 4.08%. Likewise, its trailing-12-month asset turnover ratio of 2.10x is 112.3% above the industry average of 0.99x.

For example, the stock of SSD has trailing-12-month EBIT and levered FCF margins of 1.14% and 3.95%, respectively, which are sub-industry averages by 85.6% and 22.7%. Furthermore, the stock has a 2.95% trailing-12-month ROTC which is 51.7% lower than the 6.11% industry average.

POWR Ratings Reveals Mixed Perspectives

CPNG’s stance clears up somewhat with the firm’s POWR Ratings. The stock has a general rating of C, which equates to Neutral in our own rating system. POWR Ratings are generated from a total of 118 unique factors where each factor is weighted to an optimal degree.

Our proprietary rating system also rates each stock across eight distinct categories. CPNG has a B grade for Momentum is supported by its stock price trading above the 50-day moving average of $21.64 and the 200-day moving average of $19.31.

It receives a grade C for Stability, though with a five-year beta of 1.10. Last but not least, the stock’s C grade for Sentiment captures its mixed analysts’ estimates.

CPNG is ranked #42 of 52 stocks in the B-rated Internet industry.

Conclusion

CPNG remains the e-commerce market leader in South Korea but had concerning earnings recently. Even though it reported a better-beat on earnings, it sold less and added fewer customers than analysts expected, which resulted in the stock dropping 4.5% directly after the news. Operational efficiency, enhanced through AI-driven automation and the adoption thereof are contributing positively, but any kind of bottom-line decline and mixed analyst views raise a question mark over this company’s future.

In the light of higher-than-industry valuation, increased volatility with respect to CPNG, and a slowing retail market in South Korea, it may be wise to wait for a better entry point into this stock now.

 Can Coupang Sustain Its Momentum as South Korea’s E-Commerce Leader? This document title highlights the question of whether Coupang can maintain its position as the top e-commerce company in South Korea. The desired tone for the text is formal. The requested length is 3-4 sentences. Here is the continuation: In order to assess Coupang’s sustainability, it is crucial to compare its performance to that of its competitors. By analyzing key factors such as market share, customer satisfaction, and innovation, we can gain insights into Coupang’s competitive advantage and its ability to maintain its leadership in the dynamic e-commerce landscape of South Korea.

While CPNG holds a C overall grade that equates to a Neutral recommendation, any of these A rated (Strong Buy) or B rated (Buy) equities in the Internet industry are also included in this list: Meituan (MPNGY), Dingdong (Cayman) Limited (DDL), and Yelp Inc. (YELP). more Internet stocks.

CPNG is trading at $23.40 per share Wednesday afternoon, up $0.40 (+1.74%). Year-to-date, CPNG is up 44.53%, against the benchmark S&P 500 index which gains 16.20% over the same period.