What is Coupang, the Korean company that bought Farfetch?

what is coupang

If CPNG can grow revenues faster or expand margins faster, then my bull case looks even better. If revenues slow down faster than consensus and we don’t see margins expanding, then I don’t see any reason to stick with the stock. Clearly, I think Coupang, Inc. is a bargain at current prices and might have a 200% upside over the next 3-5 years, but that means revenues need to compound at ~12% per year while net income margins expand by approximately 100 bps per year. If we look at NTM P/E multiple, CPNG has never been cheaper.

Plus, the availability and assortment of goods is many times greater. So, by buying Farfetch, Coupang is now part of this massive market that goes far beyond https://www.currency-trading.org/ South Korea. South Korea’s big conglomerates, called chaebol, and others are building their own delivery networks as Coupang plans its expansion.

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And what’s even more confounding is that Coupang’s market cap is made up of nearly 20% net cash, and it’s already amply profitable. And yet, investors have wanted nothing to do with the South Korean e-commerce company. Jonah leads an investing group, Fundamental Growth Investor, where he and his team publish the most comprehensive deep dives on public companies (7,000+ words).

what is coupang

For Coupang to deliver mid-10s% in the second half of 2024, it will have to pull out something special. Although, to be clear, this stock hasn’t been viewed by investors as a growth stock for some time, and therefore, hasn’t been priced as a growth stock. I am a former Wall Street wealth advisor and portfolio manager turned entrepreneur and full-time investor/trader. I run a premium service called Fundamental Growth Investor on Seeking Alpha’s Marketplace where my team publishes the most comprehensive deep dives on public companies. The service also includes quarterly updates on portfolio companies, current portfolio with position sizes, investment models, trading alerts, live chat, daily webcasts, trading charts, and much more.

For example, the Rocket WOW membership program that was introduced in 2019 provided customers with unlimited free shipping, Dawn Delivery, Same-Day Delivery, free returns for 30 days, and Rocket Fresh groceries. Rocket Fresh has become a leading online grocer nationwide, and Coupang Eats, the largest online food delivery service in Korea, directly contracts partners for efficient service. Since its launch, Rocket Fresh has grown to become the leading nationwide online grocer. Coupang also launched Coupang Eats, the largest online food delivery service in Korea, which delivers food to customers using only delivery partners directly contracted by us.

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The Motley Fool reaches millions of people every month through our premium investing solutions, free guidance and market analysis on Fool.com, top-rated podcasts, and non-profit The Motley Fool Foundation. Coupang Pay is a fintech offering that completes the whole online shopping experience. Customers can make seamless payment for all their Coupang orders via Coupang Pay.

Anyone who follows my work will know that I put a lot of focus on the customer adoption curve. And for Coupang to still be increasing its active customers to 21 million, goes to the heart of the bear case that long ago argued that Coupang had already saturated its market penetration in South Korea. In the near term, Coupang has demonstrated an impressive y/y increase in active customers each quarter of the year, with a solid 16% y/y increase in active customers in Q4. If CPNG reports better-than-expected revenues and earnings with strong guidance, then I’m expecting some big moves over the next 6-12 months driven by multiple expansions.

Looking ahead to 2024, I anticipate sustaining a mid-10s% compound annual growth rate. Despite challenges like ongoing investments in Developing Offerings and increased competition, the underlying profitability of Coupang’s core business displays https://www.topforexnews.org/ promise. The company’s robust growth, evidenced by a continual rise in active customers to an impressive 21 million, challenges skeptics who argue market saturation. Coupang’s Q4 was up against the easiest comparable quarter of the prior year.

  1. Clearly, I think Coupang, Inc. is a bargain at current prices and might have a 200% upside over the next 3-5 years, but that means revenues need to compound at ~12% per year while net income margins expand by approximately 100 bps per year.
  2. While it’s still early to assess the full impact, this acquisition positions Coupang to potentially transform the customer experience in the luxury fashion segment.
  3. Therefore, I believe that approximately $2.3 billion of EBITDA could be on the cards for Coupang’s core segment in 2024.
  4. And investors will go from risk-seeking to risk-averse without a moment’s notice.
  5. Rocket Fresh has become a leading online grocer nationwide, and Coupang Eats, the largest online food delivery service in Korea, directly contracts partners for efficient service.

Jonah also shares his investing and trading portfolios (3.5-year CAGR of 86%) alongside investment models, daily webcasts, quarterly earnings analysis, trading alerts, and a live chat community group. Is selling pressure from SoftBank, which still owns more than $5.5 billion of the company (approximately 24% of the outstanding shares). What I like about Coupang is that with plenty of free cash flow that keeps only growing, the company can afford to take such bets.

Korea is home to one of the largest and fastest-growing e-commerce opportunities anywhere in the world. Total e-commerce spending was $128 billion in 2019, which is expected to grow to $206 billion by 2024, implying a CAGR of approximately 10%.48 Total e-commerce spend for all Internet buyers in Korea. AMZ Advisers is a full-service eCommerce consultancy focused on creating growth opportunities for Brands / Manufacturers / Private labels across the US, Europe, Canada, and Asia. Our team of 45+ talented individuals has come together to drive sales for brands worldwide since 2014.

Complete integration enables Coupang to control and improve the entire experience, from the customer app to the delivery of the order at the customer’s door, while increasing efficiency and lowering prices for customers. Coupang reimagined the e-commerce experience with its Rocket Delivery service that promises faster deliveries, a vast selection, low prices, and easy returns. It is interesting to see, one of the risks that I noted was the acquisition of customers. But active customers only grew 18% in 2020, and they provided zero color about why active customer growth slowed nearly in half year-over-year, during the time period when I guess I would have expected it to grow.

Coupang is a South Korean e-commerce player known for its innovative approach to customer experience and delivery services. Primarily operating in Korea and Taiwan, Coupang has expanded its offerings beyond product commerce to include services like Rocket delivery. I think their mission statement rings true for a lot of their customers who probably can’t remember https://www.forexbox.info/ what life was like before Coupang. You can already see Coupang Wats as the first extension of that. We’re good at delivery, and they talked about in their S-1 how they take some of the principles from their normal grocery and consumables delivery, that knowledge and transfer it to the sort of contracted business to compete in the food delivery space.

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Moreover, the competitive landscape is intensifying, with increased interest in cross-border e-commerce platforms, particularly from Chinese competitors. This heightened competition poses potential risks to user attrition and basket sizes. The ongoing investments in developing offerings, particularly in Taiwan, contribute to incremental losses in adjusted EBITDA (we’ll soon discuss further). As you can see from this graphic above, subsequent to my previous analysis, the stock continued to sell off toward its all-time lows. Very few investors would have had the stomachs to continue to hold on to this stock.

Maybe I’m missing something in the picture, maybe I should be able to draw some conclusions there that I’m just simply overlooking. But that was one of the big questions I had still lingering over my head coming out of this S-1. The business was founded in 2010 by Bom Kim, a Harvard alumnus. The company is based in Seoul, South Korea, and Seattle, the United States. Since then, Coupang has grown impressively especially during the Covid-19 pandemic when demands for online shopping peaked. Coupang, a start-up founded by a Harvard Business School dropout, helped transform e-commerce in South Korea, one of the world’s fastest-growing markets for online shopping.

It would be nice in future quarters to see the breakout of that spend. They’re not obligated to provide it, but it’s something I wonder. Of course, you can always track gross profit and operating margin just from the topline numbers every quarter and get a sense from those big aggregate numbers.

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Services promising faster shipping often ask to choose from a fraction of the selection, order before early cut-off times, pay higher fees or prices, or all of the above. In addition to the size of the opportunity, key attributes have contributed to Korea’s high online growth and made it poised for technology-led retail innovation. These attributes include High Mobile Penetration, the rise of homegrown technology companies that are driving a bigger and deeper selection of merchandise at highly competitive prices for consumers, and embracing convenient online shopping. While the frequency will push up your total spend, the margin on all of that may decrease, because you are buying stuff that’s very small, because you’ve paid for the service. I’m not saying that I’ve ever done this, but I can easily see someone just buying one item for delivery in the morning and doing that day after day, after day. Overtime that can hurt the operating margin of a business like this.

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