Coupang (NYSE:CPNG) still has a strong chance to become an international e-tailer success story. However, there’s little to suggest that CPNG stock can break out anytime soon.
The first problem is profitability. So while I personally believe it is investment-worthy, share prices won’t explode overnight.
There is plenty of time to establish a position in Coupang’s current price range.
A cursory glance at Coupang’s Q1 results paints a similar picture to past earnings reports: A company that intrigues because it pulls in massive revenues, yet one that records net losses consistently.
In the first quarter, Coupang managed to record $4.206 billion in revenues. However, it again posted a net loss. This time that net loss hit $295 million.
Simply because Coupang continues to record net losses it will continue to trade sideways. As many have noted, once it records a net gain there should be a spike in prices.
That simply hasn’t happened yet, but those revenues are growing rapidly. Net revenues increased 74%, from $2.413 billion to $4.206 billion between the first quarters of 2020 and 2021.
That mix of positive and negative signals should keep prices from moving in the extreme in either direction. This is a continuation of the same story for the Korean e-tailer that has been dubbed the next Amazon (NASDAQ:AMZN).
And if you run the numbers, Coupang does resemble a scaled-down version of Amazon.
A Closer Look at CPNG Stock
Amazon recorded $108.5 billion in Q1 revenues while Coupang recorded $4.206 billion. Coupang is roughly 1/25th the size of Amazon by that metric. Coupang is 1/19 the customer base that Amazon does with 16.037 million customers. Amazon has 310 million.
That means Amazon customers spent more – $350 versus $262 – per customer than Coupang’s did in Q1. Fortunately for Coupang, that figure is also growing rapidly. Revenue per customer increased 44% Q1 year-over-year.
The thrust is clear: Amazon is much bigger, and if Coupang ever hopes to truly recreate the scale Amazon has achieved, it’ll do so outside of Korea.
Coupang clearly believes that its domestic business in Korea is reaching a critical point.
Founder Kim Bom Seok stepped down from the company’s board in June. He will no longer be involved in the company’s domestic operations in Korea. Instead, he is focusing on international expansion.
Coupang has wasted little time in ramping up those efforts. It expanded into Japan in June and recently announced its expansion into Taiwan. The company is offering food, beverages, daily necessities and pet supplies in both markets currently.
The company has also been undertaking hiring efforts within Singapore as well. It could announce that it has expanded there soon as well.
It is clear that Coupang is entering a period of growth. But with that comes growing pains. The test isn’t a simple one. The factors that made it so successful domestically won’t necessarily translate in Japan, Taiwan, and wherever else it launches.
Coupang Isn’t Amazon Yet
Coupang has been followed by multiple issues which have plagued Amazon. Coupang is now facing public backlash over how it treats its workers, just as Amazon has. Working conditions and hiring practices have come under fire.
More recently the Korea Fair Trade Commission carried out an investigation at company headquarters. Coupang is under investigation for allegedly manipulating its algorithm to unfairly advantage its private-label products in search placements.
Amazon has been accused of similar behavior in the past as well.
Ultimately Coupang should be able to navigate these issues. The real issue is going to be how it fares in its international expansion efforts. That will move the needle on CPNG stock in a significant way.
If and when Coupang posts a net gain it’ll be a new era for the Korean Amazon. For now, prices won’t move up or down much.
On the date of publication, Alex Sirois did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
