Whenever a company is labeled the next Amazon or the Amazon (NASDAQ:AMZN) of (fill-in-the-blank) you might be excited or skeptical. But you should also be curious. That’s the emotion that I find myself displaying with Coupang (NYSE:CPNG). The South Korean company has been a pandemic winner. And that’s one reason CPNG stock took off like a rocket after its IPO in March.
The stock has come down about 10% from its post-IPO surge. But it’s still sitting at about a 30% premium from its initial price of $35. According to David Moadel, investors who have not initiated a position on Coupang should wait to buy a future dip. And Josh Enomoto expressed a similar sentiment that CPNG stock was richly valued.
Both writers helped inform my opinion that I like CPNG on my watch list more than I do as a stock in my portfolio. At least for now.
But how any of the writers at InvestorPlace feel about CPNG stock, or any stock, is one thing. How you feel about the stock is all that matters. To help you form an opinion about Coupang, let’s take a closer look at the opportunity that exists.
How Big Is the Company’s Home Market?
One of the facts I wanted to know about Coupang is the size of the market in its home country of South Korea. At the end of 2020, South Korea was the sixth largest e-commerce market in the world. In 2020, e-commerce in the country increased 22%.
Prior to the pandemic, Statista forecast the compound annual growth rate (CAGR) of e-commerce in South Korea to be about 6% through 2024. However, heading in late 2020, Global Data’s E-Commerce Analytics put that CAGR number at about 12%. That factors into approximately $141.8 billion. In its IPO filing, Coupang cited revenue of $12 billion in 2020.
That’s good news. However, there was a statistic buried in the Statista number that resonated with me. According to the company’s research, 68% of South Korea’s population bought at least one product online in 2020. That suggests that the market is already saturated.
It’s fair to note that Coupang’s growth is not a zero-sum game. Consumers can and will order from multiple online sources. The bad news is that Coupang already serves approximately 30% of the South Korean market.
Will the Company Expand Internationally?
A likely course of action for Coupang will be to expand into other countries. And the most likely target would be Southeast Asia. That’s more than an educated guess. However, until we hear something from the company, it’s still just a guess.
And it’s a move that doesn’t ensure investors of success. Here again, I turn to Enomoto’s article in which he states that other companies in the region are getting in on the e-commerce action. Which may have the effect, as Enomoto writes, of having Coupang be heavily reliant on South Korea.
You Can Wait on Coupang
Coupang is a shiny object and investors love shiny objects. That doesn’t mean CPNG stock won’t justify what analysts believe may be a $60 stock price. But anytime you pay tomorrow’s price today it’s fair to ask yourself why you’re doing that.
When you ask that question, the case for CPNG stock may not seem as strong. Until Coupang shows the ability to expand into different markets, you have to be concerned that if the analysts’ price target is accurate, future growth is becoming rapidly priced in.
There’s always a desire to jump on the next big thing. I’m not willing to say that Coupang is the next Amazon yet. But I’m willing to give them a closer look. I like the stock on my watch list more than in my portfolio while I wait for more evidence.
On the date of publication Chris Markoch did not have (either directly or indirectly) any positions in the securities mentioned in this article.
Chris Markoch is a freelance financial copywriter who has been covering the market for seven years. He has been writing for Investor Place since 2019.