Korean e-commerce giant Coupang (NYSE:CPNG) and its stock will continue to face pressure. That’s particularly true after the firm released earnings in early March, which weren’t particularly well received. CPNG stock fell as a result.
But now that share prices have come down below $20, its stock is worth considering. Growth is growth, and that will ultimately lead to a point where Coupang breaks even.
So for investors willing to take a leap of faith, Coupang represents a long-term buy-the-dip opportunity. Let’s begin with the negatives, because investors can’t pretend there aren’t issues with the company, then take a closer look at the positives.
The Negatives in CPNG Stock
The most persistent argument against Coupang is that it continues to be plagued by losses. And based on recent results, those losses aren’t getting better.
No matter how you slice it, 2021 wasn’t kind to the company in terms of losses. Net losses more than tripled overall throughout the year. The company posted a $463.2 million net loss in 2020, which increased to $1.5 billion in 2021.
In the fourth quarter, it was arguably worse. Those net losses multiplied by a factor of 4.89, rising from $82.8 million to nearly $405 million in net losses in Q4 2021.
That narrative has persisted for the company ever since it undertook its initial public offering (IPO) in early 2021. Its net losses are big, and they aren’t improving.
At some point, investors will sour on growth for the sake of growth alone. There has to be a foreseeable breakeven point for capital to remain in a stock.
According to one source, that point could come relatively soon for CPNG stock. As reported by Yahoo! Finance, “Consensus from 12 of the American Online Retail analysts is that Coupang is on the verge of breakeven. They expect the company to post a final loss in 2023, before turning a profit of US$378m in 2024.”
If that eases your mind and makes CPNG stock a stronger consideration, it is far from the only positive for the company.
Growth Investing and Optimism in CPNG Stock
Investing in growth stocks requires optimism. The idea is that a rapidly increasing top line can overcome operational issues that lead to losses. At some point, the growth becomes so powerful that it simply trumps the losses and things begin to turn around.
One of the most salient positives for Coupang is that it is increasing both its customer base and revenues per customer. The company counted 17.9 million customers by the end of 2021, up from 14.9 million by the end of 2020.
If the company had derived the same revenue per user, it would have seen revenue reach $4.6 billion in Q4 2021. That would have represented a 21% increase.
But Coupang increased revenues per consumer by 11% in the same period. That resulted in a 34% increase in revenue. That’s a strong part of the narrative that suggests the breakeven point isn’t far in the future. If Coupang can increase its customer base while simultaneously increasing revenues per user consistently, that event will arrive much faster.
Expansion in Korea
Coupang is working hard to improve its already strong hold on the Korean market. The country’s population is more than 51 million. Coupang currently has more than 17 million customers, most of them in Korea.
The company added more than 15 million square feet of infrastructure in 2021. That was more than in the preceding two years combined. It’s fairly clear Coupang knows where its bread and butter is.
Korea is an attractive e-commerce growth market and the company knows this well. Coupang might look worse than before based on mounting losses. But the optimistic view that the company will figure it out can’t be discounted.
Given the extremely low price right now, there’s tremendous upside in the future for CPNG stock. The company isn’t going anywhere anytime soon, and it will grow out of its current troubles. Korea is a strong e-commerce market and Coupang is a strong play on that growth.
On the date of publication, Alex Sirois 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.
