Due to of cybersecurity crackdowns by the Chinese government, some investors are reluctant to get involved with Asian stocks in general. That’s a shame, as South Korean e-commerce company Coupang (NYSE:CPNG) has a thriving marketplace and CPNG stock could provide long-term value to the shareholders.
While Coupang might not be popular among financial traders today, it was once a hot topic of conversation on Wall Street. In fact, as of early July, Coupang had the biggest initial public offering (IPO) of 2021.
As we’ll see, however, CPNG stock’s post-IPO performance has been underwhelming. It might require a miracle for the stock to get back to its $50-ish peak.
Or just maybe, it will only need some time as the trading community should eventually recognize Coupang’s important role in the Korean e-commerce ecosystem. Until that happens, there’s a window of opportunity for patient, forward-thinking contrarians.
A Closer Look at CPNG Stock
CPNG stock had an auspicious start on its first day of public trading, which took place on Mar. 11, 2021.
The stock closed that day at $49.65, around 40% higher than the stock’s IPO price of $35.
Apparently, the rally wasn’t finished quite yet. The next day, Mar. 12, Coupang shares opened at $52.54 and it seemed that the buyers will fully in control.
As it turned out, though, the sellers were about to gain the upper hand. After topping out in the low $50’s, CPNG fell below $40 in May and then below $30 in August.
By mid-October, the Coupang share price was still below $30 and the pessimism was almost palpable.
On the other hand, contrarians spring into action during peak pessimism – or at least, that’s what they’re supposed to do if they still believe in the company.
And thankfully, there are reasons to stand behind Coupang even though it’s out of favor on Wall Street.
Supporting Smaller Merchants
There would be no reason to envision a future for Coupang if the company didn’t offer value for its merchants.
The data, however, clearly indicates Coupang’s value proposition to many businesses that choose to utilize its platform.
According to Coupang, during 2021’s second quarter, small and medium-sized enterprises (SME’s) on the company’s marketplace grew their sales by 87% year-over-year.
Coupang has a good reason to offer support to the small merchants making their living on the company’s platform: they constitute 80% of Coupang’s total sellers.
Consequently, Coupang provides onboarding assistance and training to these small merchants.
Moreover, Coupang provides them with marketing and promotional activities to help them grow their businesses.
A Win-Win Scenario
At the same time, there’s a bigger-picture impact here as Coupang is helping to support the Korean economy.
Impressively, Coupang accounted for 43% of all U.S. foreign direct investment into Korea during the first half of 2021.
And importantly, much of this investment was focused on supporting small businesses and local economies.
This is truly a win-win situation as Coupang’s platform benefits the customers, the merchants and the regional economy.
Two relatively new initiatives – Coupang’s grocery business, Rocket Fresh, and the company’s food-delivery segment, Coupang Eats – should provide even more value for the community.
The only folks who haven’t yet seen the benefits are Coupang’s long-term shareholders – but a turnaround might be in store.
Coupang’s most recently released quarterly financial report indicated, on a year-over-year basis:
- 71% increase in total net revenues
- 50% surge in gross profit
- 26% gain in active customers
- 36% improvement in total net revenues per active customer
The Bottom Line
So, there you have it: multiple data points to bolster the bullish thesis for CPNG stock.
There appears to be a wide gap between Coupang’s true value and the share price. At some point, that gap should close.
Then, CPNG stock can reclaim its rightful place at $50 level – and the returns will be considerable, if you get into the trade now.
On the date of publication, David Moadel 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.