Coupang (NYSE:CPNG) shares are in the discount bin. But when it comes to buying CPNG stock, does cheaper mean a better value, or simply a purchase of damaged goods?
Since debuting this March on the New York Stock Exchange (NYSE) at $63.50, shares of CPNG stock have dropped more than 56%. Let’s take a look at what’s happening off and on the price chart of CPNG, then offer a risk-adjusted determination aligned with those findings.
How Coupang Compares to the Industry
If you call the U.S. home, you know of Amazon (NASDAQ:AMZN), of course. And a pandemic fast approaching two years in duration, with its “new normal” of buying goods and services online, only reinforced the e-commerce giant’s tight grip on our daily lives.
And in South Korea, as others are intimately aware, there’s Coupang — an e-commerce behemoth popularly referred to as the country’s Amazon.
Yet unlike its American counterpart, whose shares have more than doubled since bottoming out in March 2020, CPNG stock’s performance has been marked by heavily-discounted returns.
What’s more, the pressure on CPNG stock comes despite some pleasingly bullish items. Coupang enjoyed industry-leading sales growth of 48% year-over-year (YOY) this past quarter. Its YOY active user growth of 20% marked its 15th straight quarter of growth at or above 20%.
Additionally, Coupang’s delivery app, Coupang Eats, is the most-downloaded app on Apple’s (NASDAQ:AAPL) iOS in South Korea. So, what gives? Actually, CPNG stock’s bearish performance isn’t altogether a mystery.
Why CPNG Stock Is Down
Most recently, last month’s earnings confessional came up short of consensus views despite some of Coupang’s impressive-sounding metrics. And some of its line items just looked less-than-terrific in a more critical environment. That brings us to the real story behind Coupang’s share price struggle.
In no uncertain terms, CPNG stock has a higher multiple growth narrative. It’s been under pressure in 2021 as investors fret inflation, supply chain disruptions and other macro issues. Compounding those matters is Coupang’s “ill-timed” growth playbook dilemma with investor sentiment working unfavorably against it.
Bottom-line, and where that line item looks like a red balloon these days, Coupang has been investing heavily in its business for future growth. And at the risk of simplifying things, its path to growing and its in-tow larger losses haven’t sat well with Wall Street.
The good news is what CPNG stock has been experiencing isn’t without precedent, and it doesn’t have to last. Far from it. Moreover, you don’t have to look far to appreciate that today’s fair-market value of CPNG stock isn’t the end all, be all.
For example, AMZN stock has also seen periods of bullish betrayal when the company valued more costly long-term growth over short-term, bottom-line-friendly gains. So while investors might say goodbye to CPNG stock in 2021, they may also want to take a “good buy” action to usher in a new — and likely better — year ahead.
CPNG Stock Weekly Price Chart
Source: Charts by TradingView
It’s popular to be lured into a stock on the hyped promise of it being the next Amazon. I can’t promise that type of greatness in Coupang without being disingenuous. But today, investors can buy CPNG stock with a much stronger chance of owning a ground floor opportunity.
Technically, the illustrated weekly view of CPNG stock reveals that last week’s marginal, all-time-low hammer candlestick received bullish pattern confirmation. It also has support from an aligned and good-looking stochastics setup.
Bullishly, shares of Coupang have already broken above one downtrend line connecting the stock’s extreme values. The next technical barrier of notice is a second layer of angular resistance, as well as a potential lateral hurdle that’s thwarted upside in recent weeks.
But there’s always something, right? Well, there is if we want to see it.
In CPNG stock at this juncture, that could be costly business given the placement of this risk-to-reward situation — with or without living up to being the next AMZN stock.
Today, and for those that see a more real possibility of upside in 2022 and beyond, consider a well-placed, limited-risk May $30 call for CPNG stock. It sports a manageable risk of about 10% and its open-ended profit profile looks like smart business off and on the price chart.
On the date of publication, Chris Tyler 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.
The information offered is based upon Christopher Tyler’s observations and strictly intended for educational purposes only; the use of which is the responsibility of the individual. For additional market insights and related musings, follow Chris on Twitter @Options_CAT and StockTwits.