The Amazon of South Korea Has Tons of Growth Opportunity Ahead

Korea has a large and growing e-commerce market and Coupang (CPNG 1.01%) is looking to capture it. In this clip from "3 Minute Stocks Updates" on Motley Fool Live, recorded on March 30, Motley Fool contributor Brian Withers assesses the struggles and growth opportunities ahead for Coupang and discusses its similarities to Amazon (AMZN -1.65%)

Brian Withers: I'm a fan of e-commerce stocks, but I'm still on the fence with Coupang. I love the business, but growth is slowing. Let's take a look at what's going on. First of all, just an intro to Coupang's market. You think Korea is a small country, but man, it's got a massively large and growing e-commerce market. You can see there. By 2025, e-commerce is going to be almost half of the total retail spend at $291 billion and that is just massive. I would never have guessed that this company is the third largest e-commerce growth market in the world, growing at double-digits, only behind the U.S. and China. It's growing faster than the U.S., so pretty impressive opportunity there. They are also widening their moat. They're very much an Amazon-like company, in that they own their own fulfillment centers. They own their last-mile delivery. In fact, you can order stuff up to 10:00 p.m. or midnight and get it delivered to you the next morning by 6:00 a.m. for your way to work. They are absolutely focused on their highest value customers that they call their Wow customers. You can see on the bottom right, there's only nine million of the total Korean online shoppers of 37 million. They are continuing to improve the benefits for Wow members. Think of it like a Prime member for Amazon where you pay a fee every year, but you get these cool features such as fast delivery. They even got unlimited video streaming and travel discount. Lots of benefits of being a Wow member. But the stock, holy cow, it's just done nothing but go down since it IPO-ed. Their revenue missed. You can see they missed on the bottom line. Down here on the bottom, the growth has been decelerating over the last five quarters. It's gone from 74% year-over-year growth down to 34%. I think investors are afraid that this trend will continue and it will continue to grow slower. I'm still a bit on the fence on this company but it's certainly an impressive one to watch.

Toby Bordelon: You're on the fence, Brian. What would you need to see to convince you this is a good long-term buy?

Withers: I want to see the growth stabilize. Maybe not one quarter, it was 34% last quarter if they did 35% or 36%, I'd want to see a couple of quarters of consistent stable growth. The other piece is, they are specifically, geographically, located in South Korea. But, I think this company has all the opportunity to expand into places outside of its geography in the Asia-Pacific region, and I think they could take a ton of share in other places beyond South Korea. So, look for some stability and what is it's real long-term market ambitions. Is it just South Korea or is it more than that?