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Why Coupang Stock Was Down Almost 18% in August

By Jon Quast – Sep 3, 2021 at 12:41PM

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Investors appear concerned with the company's profitability, but it has a growing revenue stream that could help improve its bottom line.

What happened

Shares of Korean e-commerce company Coupang (CPNG 2.74%) were down 17.5% in August, according to data provided by S&P Global Market Intelligence. The company reported quarterly financial results early in the month, which caused the stock to drop.

So what

On Aug. 11, Coupang reported results for the second quarter of 2021. In Q2, the company's revenue was up 71% year over year to almost $4.5 billion. This was slightly ahead of analyst expectations. However, it reported a quarterly net loss of $518 million, which was a far bigger loss than what Wall Street anticipated. 

A person appears to be frustrated with something that they saw on a computer.

Image source: Getty Images.

Oddly enough, several analysts upgraded Coupang stock following the report -- typically analysts downgrade a stock (don't suggest buying) when the company doesn't live up to their expectations. But both Deutsche Bank and Daiwa upgraded the stock to buy following the report, according to The Fly. This typically causes the stock to pop, but Coupang stock finished the month down nevertheless.

Now what

Investors appear to be in two camps presently regarding Coupang stock. On one hand, investors have been rewarded in the past with regional e-commerce giants like MercadoLibre and Sea Limited and, therefore, see opportunity with Coupang. However, other investors note that the profit margin for Coupang is quite thin. And it's currently pursuing opportunities like grocery and food delivery, which are particularly unprofitable at the moment.

Regarding profitability, investors should keep an eye on Coupang's third-party sales numbers. Third-party sales means Coupang is facilitating sales for other parties. Typically, third-party sales have better margins than first-party sales. In Q2, Coupang's revenue for third-party merchant services grew 165% year over year but still represented less than 10% of total revenue.

If Coupang can grow third-party sales and other more profitable revenue streams, then perhaps this can indeed be another regional e-commerce winner. 

Jon Quast has no position in any of the stocks mentioned. The Motley Fool owns shares of and recommends Coupang, Inc., MercadoLibre, and Sea Limited. The Motley Fool has a disclosure policy.

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Stocks Mentioned

Coupang, Inc. Stock Quote
Coupang, Inc.
CPNG
$19.48 (2.74%) $0.52
Deutsche Bank Stock Quote
Deutsche Bank
DB
$10.63 (0.47%) $0.05
MercadoLibre Stock Quote
MercadoLibre
MELI
$930.99 (4.69%) $41.73
Sea Limited Stock Quote
Sea Limited
SE
$58.37 (7.58%) $4.11

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