Coupang (NYSE:CPNG), South Korea’s Amazon (NASDAQ:AMZN) and Shopify (NYSE:SHOP) clone, will likely surprise with its first-quarter earnings on May 10. This could push CPNG stock even higher, despite its mediocre performance since its early March IPO.
Coupang stock has risen 20% from its IPO price of $35.00. But since March 11, when it closed at $49.25, CPNG stock has slid $7.35, or 15% to $41.90, as of April 30.
The Motley Fool recently wrote about Coupang as being like both Amazon and Shopify. Coupang allows third parties to set up online storefronts on its site, along with fulfillment provided by Coupang. Shopify is starting to provide fulfillment services for its online merchants, just like Amazon does now with its third-party FBA services (Fulfillment by Amazon).
Last year Coupang’s sales grew 90.8% to $11.967 billion from $6.27 billion. Its Q4 revenue was up 93% to $3.8 billion. Analysts expect $4.29 billion in revenue for Q1, up 12.8% over Q4. Page 99 of the company’s prospectus indicates that its Q1 2020 revenue was $2.413 billion. This implies that the Q1 revenue estimates if they are hit, will be 77.8% higher than a year ago.
Right now, Coupang has a healthy $71.9 billion market capitalization. But the stock is actually quite cheap. According to analyst estimates, it trades at just 3.8 times forecast $18.9 billion in revenue for 2021. And for 2022, CPNG stock is at just 2.7 times its forecast $26.59 billion in forecast sales.
Valuation of Coupang Stock
That leaves plenty of room for the stock to rise. For example, Amazon trades at 3.57 times 2021 revenue forecasts and 3.04 times 2022 revenue. These are higher than Coupang’s valuation.
For example, at 3.04 times Coupang’s 2022 revenue forecast of $26.59 billion in 2022 sales, CPNG stock would have a market capitalization of $80.83 billion. This is 12.4% above its $71.9 billion market cap. This means that the CPNG stock target is $47.11 per share.
Moreover, Shopify trades at 33.5 times 2021 sales estimates and 25.3 times 2022 sales. In other words, since Coupang is like both companies, it deserves to have a Price-to-Sales (P/S) multiple somewhere between three times and 25 times sales.
For example, conservatively valued at five times 2022 sales, it would be worth $133 billion, or 84.9% above today’s price. That gives CPNG stock a target price of $77.47 per share.
Where This Leaves CPNG Stock
Not all news related to Coupang is glorious. The Financial Times (subscription required) recently reported that Coupang is being accused by various people in South Korea for severely overworking some of its employees. A number of its young people have died from heart attacks that relatives have said were due to overwork.
The FT article also described how the families are having difficulties getting Coupang to acknowledge this cause. Nevertheless, it was found handing out envelopes of cash at various funerals. This is actually an important article since Coupang is by far the country’s largest e-commerce company and its third-largest employer.
Barron’s wrote on April 7 that J.P. Morgan (NYSE:JPM) had begun coverage of CPNG stock with just a Neutral rating but also a $48 price target. The good news is that represents a gain of 15%, although this is far short of my $77.47 price target and 85% upside.
Tipranks.com indicates that the average target price of 6 analysts’ reports on CPNG stock in the last 3 months is $50.50 per share. This represents a potential gain of 20.5% over today’s price (as of April 30) of $41.90.
Keep in mind that most analysts’ targets are for the next 12 months. My 84.9% upside target could take up to two years to hit. In that regard, it would mean that the average annual return would be 36% annually on a compound average annual basis. That is a decent return for most people.
On the date of publication, Mark R. Hake did not hold a long or short position in any of the securities in this article.