JD.com (JD 6.12%) and Coupang (CPNG -0.52%) both serve millions of online shoppers in Asia. JD is China's largest direct retailer and the country's second-largest e-commerce company after Alibaba (BABA 0.59%). Coupang is the e-commerce market leader in South Korea.
Neither stock has been a great short-term investment. Over the past 12 months, JD's stock price plunged more than 40% as China's crackdown on its top tech companies, delisting threats in the U.S., and other macroeconomic headwinds spooked the bulls. Coupang, which went public a year ago at $35 per share, has plummeted nearly 50% below that key level as investors fretted over its slowing growth and steep losses.
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The broader retreat from growth stocks -- which was caused by inflation, rising interest rates, the Russian-Ukrainian conflict, and other macroeconomic challenges -- exacerbated the pain for both companies. But should investors look past those near-term headwinds and invest in either Asian e-commerce giant right now?
The differences between JD.com and Coupang
JD is a much larger company than Coupang. It served 569.7 million annual active shoppers at the end of 2021, and its first-party logistics network covers nearly all of China with more than 1,300 warehouses. Its Prime-like subscription service, JD Plus, has over 25 million subscribers.
JD initially started out as a first-party marketplace that took on its own inventories and fulfilled all of its own orders. But over the past few years, it strengthened its margins by opening up its marketplace to third-party sellers and offering its logistics services to external customers. It also operates brick-and-mortar stores and provides grocery delivery services.
JD also owns Jingxi, a discount marketplace for China's lower-tier cities; JD Property, an infrastructure asset and property management service; and its other digital initiatives and overseas investments. But these "New Businesses" still generated less than 3% of its revenue in 2021.
Coupang served 17.9 million customers at the end of 2021. Like JD, Coupang invested heavily in the expansion of its first-party logistics network. It now operates fulfillment centers within seven miles of roughly 70% of South Korea's entire population.
Coupang was also initially a first-party marketplace, but it subsequently added third-party sellers to the mix and opened up its logistics services to external customers. It also rolled out its own subscription service, Rocket WOW, which hit 9 million paid subscribers at the end of 2021.
Coupang also owns a streaming video platform called Coupang Play, which it bundles into its Rocket WOW service, a grocery delivery service called Rocket Fresh, and a food delivery platform called Coupang Eats.
Which company is growing faster?
JD's revenue rose 29% in 2020 and 28% to 951.6 billion yuan ($149.3 billion) in 2021, and analysts expect 22% growth in 2022 and 17% growth in 2023. JD's top-line growth is gradually decelerating because its core business, JD Retail, faces macroeconomic and competitive headwinds in China.
To offset that slowdown, JD is expanding its New Businesses division, but that segment's red ink caused JD to book a full-year net loss on a generally accepted accounting principles (GAAP) basis in 2021. That represented its first unprofitable year since 2018, but analysts expect it to turn profitable again in 2022 and double its net income in 2023.
Coupang's revenue jumped 93% in 2020 and increased another 54% to $18.4 billion in 2021. Those growth rates are impressive, but analysts expect its revenue to only rise 26% in 2022 and 24% in 2023.
That slowdown reflects Coupang's imminent saturation of South Korea, which has a population of just 51 million. Coupang believes it can stabilize its long-term growth by boosting its revenue per user with fresh features and expanding into overseas markets like Taiwan, Southeast Asia, and Japan -- but those efforts could be painfully expensive.
That's troubling because Coupang's net loss more than tripled in 2021, and analysts expect it to stay unprofitable for at least the next two years.
The better bet: JD.com
I wouldn't buy either of these stocks right now. JD's growth is decelerating as it pours more cash into its unprofitable new businesses, and the regulatory headwinds for Chinese ADRs could throttle its near-term gains. Coupang's slowing growth, steep losses, and murky plans for the future also make it a weak investment for a wobbly market.
But if I had to choose one over the other, I'd stick with JD, because it's larger, better diversified, and has a clearer path toward stable profitability. It's also trading at just 0.4 times this year's sales -- while Coupang looks a bit pricier (but still fundamentally undervalued) at 1.7 times this year's sales.
