Coupang Is a Play on Korea’s Burgeoning, Fast-Paced E-commerce

Coupang (NYSE:CPNG) is a Korean e-commerce company which began trading on the New York Stock Exchange on Mar. 11.  The initial public offering (IPO) was a particularly large one, with 130 million shares on sale at $35 each. According to CNBC, that made the company $4.6 billion in proceeds, putting it among the largest IPOs of all time. 

A close-up shot of a Coupang (CPNG) delivery vehicle.
Source: Ki young /

In the week following the IPO, though, share prices have moved up and down. CPNG currently sits around $44 per share, having slipped overall since its Mar. 11 close price of $49.25. 

Naturally, though, investors will be curious to understand if it now makes sense to invest in this leader in the South Korean e-commerce sphere. After all, is Coupang even comparable to other Asian e-commerce leaders?

CPNG Stock: The Next Amazon?

Many investors are trying to ascertain whether Coupang should draw comparisons to other country-leading e-commerce players, such as Amazon (NASDAQ:AMZN) and Alibaba (NYSE:BABA). My take?  In the sense that Coupang has an opportunity to dominate e-commerce within its own country, yes, it rightly draws that comparison. 

However, there is the issue of scale and addressable market. Of course, Amazon serves the U.S. and Alibaba serves China. Amazon has 310 million active customer accounts and the U.S. market anchoring its operations. Impressively, Alibaba also has 758 million active users, accounting for more than 53% of China’s online retail sales in 2020. 

Coupang, on the other hand, serves the South Korean market and its population of 51.7 million. It does have minimal overseas operations, but its opportunity is primarily domestic. So, investors who are looking for a real ground-floor opportunity in an e-commerce company that can scale like an Amazon or an Alibaba ought to consider Jumia (NYSE:JMIA). 

Korean E-commerce

That note aside, there is plenty to like about CPNG stock, the company and the market it serves.

Personally, I lived in Korea for a long time and I’m very familiar with Coupang. It’s ubiquitous. The company’s investor prospectus notes that there is 10% compound annual growth rate (CAGR) within Korean e-commerce expected through 2024 (Page 5). It also notes that Korean consumers are very demanding. Korea’s “ppali ppali” (roughly meaning “fast fast”) culture means that the country’s e-commerce players have to deliver much quicker than U.S. shoppers might be accustomed to, for example. 

My point? If Coupang is to upend its history of losses and become profitable, it will do so in a very fast-paced, demanding e-commerce environment.

Here’s one example to reinforce the speed expected in Korean e-commerce. Place an order by midnight with Coupang’s “Rocket Delivery” service and it’ll arrive by 7 a.m. the next day (Page 1). Place an online order in the morning and it’ll often reach your door the same day. And that’s not true of just Coupang alone, by any stretch of the imagination. 

Coupang’s Growth and Valuation

Speaking of fast, Coupang has grown from $2.2 billion in 2017 retail sales, to $3.8 billion in 2018, to $5.8 billion in 2019 and then to $11.05 billion in 2020 (Page 77). Needless to say, that’s staggering revenue growth. In fact, that’s a year-to-year growth succession of 73%, 53% and then over 90%. 

But as impressive as that is, profitability remains elusive. Coupang’s 2020 net loss was $474 million. However, Coupang has a slim chance of seeing profitability in 2021, judging by the trend between revenues and losses. I say slim because the company’s prospectus mentions that management anticipates losses for the coming few years. 

As for the stock, though, based on the opening trade of $63.50, CPNG stock’s valuation on a multiple of trailing-year-sales basis is almost exactly in line with Alibaba. Now, that has gone in the opposite direction with Coupang trading at $45. That is, investors value Alibaba more on a tit-for-tat basis. 

Does that mean investors should pick up CPNG shares on the dip?

The Verdict 

From my view, I suspect that Coupang may reach profitability quicker than it’s letting on. Despite the ongoing losses, there is massive opportunity in CPNG stock.

While behind, Korea’s e-commerce market is still competitive compared to China and the United States. Shares may go sideways for a bit, but I expect them to rise soon. 

On the date of publication, Alex Sirois did not have (either directly or indirectly) any positions in the securities mentioned in this article.

Alex Sirois is a freelance contributor to InvestorPlace whose personal stock investing style is focused on long-term, buy-and-hold, wealth-building stock picks. Having worked in several industries from e-commerce to translation to education and utilizing his MBA from George Washington University, he brings a diverse set of skills through which he filters his writing.

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