Coupang Is Delivering Growth and Losses


How do you go shopping for stocks in today’s stock market conditions with major U.S stock indices making record highs day after day? If you make a list of growth and momentum stocks then Coupang, Inc. (NYSE:CPNG) stock could be on your list.

The Coupang (CPNG stock) campus in Silicon Valley, California.
Source: Michael Vi /

The problem is that for now, momentum for CPNG stock seems to be on a pause. Shares were trading around $30 recently. This is below its initial public offering price of $35 per share in March. So here comes another question. Do you go shopping for stocks looking at discounts?

If you answered yes, then what about value? Value is not the same as price. Value can be very disconnected from the current stock price or even the historical price.

In the case of Coupang, which is a leading South Korean e-commerce business, potential investors must decide if CPNG stock is cheap, a bargain, or a hot opportunity.

The Good News for CPNG Stock in Q2

Some very positive news was reported in the company’s recent second-quarter earnings report. Key points include:

  • “15th consecutive quarter of over 50% constant-currency revenue growth
  • “Revenue growing at a multiple of the Korean e-commerce segment, reaching an $18 billion run-rate
  • “Q2 marked the 15th consecutive quarter with over 50% year over year growth on a constant-currency basis
  • “Total Active Customers increased 26% year over year to 17 million and Revenue per Active Customer grew 36% year over year.”

Coupang increased its gross profit $658 million in the quarter, which was up 50% year-over-year.

Based on these positive numbers, expectations for a rally by this e-commerce stock would be high. Such a rally did not materialize, however, even with a surge in revenue “growing 71% on a reported basis, 57% on a constant-currency basis.”

More analysis finds that Coupang has serious fundamental problems to solve. These shortcomings have caused investors to lose excitement – at least for now.

Q2: The Bad News

A net loss of 74 cents per share for the six months ended June 2021 was reported. This was less than a net loss of $11.56 per share for the same period the year before.

As investors expected, Coupang issued shares during its IPO. So, it is not a surprise that net cash provided by financing activities was positive. Specifically, this was the positive part of the company’s cash flow.

Operations and investments consumed, rather than generated cash. However, I must mention that a fire harmed the company’s operations.

A more thorough financial analysis of CPNG stock at MorningStar shows that fundamentals are not great.

As of 2018, the operating margin is negative and earnings per share are also negative as Coupang is unprofitable. Although the debt-to-equity ratio of 0.38 for Q2 may not seem excessive, there are few reasons to cheer with negative free cash flows.

But another red flag for Coupang is, according to MarketWatch, total liabilities for 2020 were $5.67 billion, while total assets were $5.07 billion. The missing link is total negative equity, as Coupang had a deficit in its total equity. This makes me run away without hesitation.

Valuation of CPNG Stock

Coupang has plans for international expansion in markets such as Singapore, Taiwan and Japan. As it struggles to make a profit domestically, further capital expenditures are expected to make things worse rather than better for profitability and free cash flows.

A plunge in the stock price does not make it necessarily a bargain. Compared to the broader stock market such as the S&P 500, CPNG stock has a price-book ratio of 18.6. That figure is 4.4 for the S&P 500.

So CPNG stock looks too pricey now. I want this revenue growth to turn into profits and positive free cash flows. It may seem like a great company, but this e-commerce currently stock fails the test for value investing.

On the date of publication, Stavros Georgiadis, CFA  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 Publishing Guidelines.

Stavros Georgiadis is a CFA charter holder, an Equity Research Analyst, and an Economist. He focuses on U.S. stocks and has his own stock market blog at He has written in the past various articles for other publications and can be reached on Twitter and on LinkedIn.

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