South Korean e-commerce giant Coupang (NYSE:CPNG) is down more than 5% on the day after a less-than-stellar earnings report this morning. CPNG stock has been on the descent since its New York Stock Exchange debut earlier this year. Will it manage to plug the leaks? Or will the markets come crashing down on the company?
On paper, Coupang has plenty to write home about. Sometimes known as Korea’s Amazon (NASDAQ:AMZN), the company reported revenue growth of 44%, more than double the 20% growth of the greater Korean e-commerce segment. It reported adding 20% more active users, year-over-year, for the 15th year in a row. Even gross profit is up 62% on the year.
So, with all the pleasant figures to report, what is dragging the stock down?
Turns out, there’s more to the story than cash in-flows. The company’s earnings-per-share (EPS), or in this case, losses, were below expectations by 1 cent, for an EPS of -19 cents. In the same vein, Q3 net losses almost doubled compared to a year before, to $323.98 million versus $173 million. While much of this is due to increased investments and development, it seems the markets could care less.
Is Patience the Secret With CPNG Stock?
Despite being quite volatile, many institutional investors see CPNG stock as a long-term hold in hopes that the online retailers delivers on their sky-high potential.
Several models predict Coupang will continue to outpace the market in growth, and they certainly have the evidence to back it up. While razor-thin margins have frequently produced underwhelming earnings numbers, it’s not without merit.
Coupang reinvests a substantial amount of its revenue every year to ensure continued growth and is expected to have tremendous scalability. In the rapidly growing South Korean e-commerce market, the retailer is remarkably popular and should only continue to see movement into the green as it is better able to leverage its resources and expand its profit in-flows.
On the date of publication, Shrey Dua 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.
