Despite posting strong results throughout 2021, Coupang (NYSE:CPNG) stock has lost close to 30% of its value in the past six months.
The South Korean e-commerce giant continues to grow its clout as it scales its operations but has failed to impress investors. Nevertheless, it is an excellent buying opportunity for investors to scoop up CPNG stock for just 2.5x forward sales.
Coupang has plans to become the fastest growing e-commerce player in the Korean region. Moreover, it’s also serious about its carbon footprint, as it’s focused on making zero packaging a reality. While it’s known for its Rocket Wow e-commerce service, it’s also investing heavily in advertising and its online grocery division, Coupang Eats.
Despite growing its revenues close to 90% on a year-over-year basis, it has failed to garner the market’s attention. Consequently, CPNG stock trades at a 25% discount to its consensus price target, making it a highly enticing.
The Deceleration in Sales Growth
Coupang came up against tough comparables with its rollicking performance in the third quarter last year. Its revenue had shot up over 93% in 2020, as its active customer base rose 26% during the pandemic. Moreover, its robust logistics network helped it fulfill most of its deliveries within 24 hours. Additionally, its year-over-year revenue growth dropped as more businesses began to open up.
In the third quarter this year, its revenues grew by 48% from the prior-year period, when it had grown 95% in the same period last year. Due to Covid 19-related issues, the company had to limit its orders to ensure quality, ultimately impacting its revenues. Keeping that in mind, the company could’ve easily grown more than 50% from the prior-year period.
Furthermore, its active customers also dropped sequentially in the third quarter, but the increase in customer revenue partly offset that. Moreover, net losses increased from $173 million to $324 million. Additionally, the company net loss widened from $177 million to $207 million on an adjusted earnings basis. However, after the third quarter, Coupang had close to $3.93 billion in cash, so it has a lot of breathing room to ramp up investments.
Performance of Other Segments
In the second quarter, we saw Coupang Eats nearly double its sales during the first six months of the year. Though Coupang doesn’t break down the portion of revenues it generates from other segments, we know that it has witnessed triple-digit growth in the first three quarters on a year-over-year basis.
It’s clear that revenues from other segments are increasing rapidly though it hasn’t had much of an effect on its share price. However, as we look towards next year it’s easy to foresee that revenues from the company’s other segment could add up to 15% of the underlying business.
Coupang’s fundamentals are improving steadily. Despite the deceleration, revenue growth in the third quarter was at a healthy 48% from the prior-year period in the third quarter. Moreover, gross profits rose 62% from the same period last year. Additionally, the company isn’t burning through its profitability at a brisk pace. During the third quarter of 2020, its EBITDA was negative 5.6%, whereas it was a negative 4.5% in the third quarter of 2021. Investors appear to be too writing off the company too quickly.
Bottom Line On CPNG Stock
Coupang’s revenue growth has slowed down as the effects of the pandemic have started fading away. Despite the deceleration in revenues, the company is still performing exceedingly well and poised for sustained growth ahead. Moreover, the performance of its non-core segments has also been impressive which will continue contributing significantly to its revenues.
CPNG stock is a fascinating buy e-commerce play at current levels.
On the date of publication, Muslim Farooque 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