E-commerce is one of the largest, fastest-growing industries worldwide. The global e-commerce market is expected to hit $5.7 trillion in 2022, which is a massive increase from the $572 billion worldwide spend in 2010. By 2023, Shopify analysts expect 20.8% of retail sales to come from online purchases, which will grow to 23% by 2025. Even with fortunes already made through early e-commerce leaders like Amazon, there is still a gigantic opportunity for companies to win the race for consumer spending online.
Within the e-commerce space, there's one stock I like more than others: a South Korean online retailer named Coupang (CPNG -1.30%). Here's why this e-commerce company is set to crush the market in 2023 and beyond.
Coupang: The 'South Korean Amazon'
Many companies claim to be the "Amazon of X" due to the Seattle conglomerate's massive success over the past few decades. However, few can actually live up to these claims. Coupang is one of them. With a customer-centric approach to online commerce, Coupang has rapidly grown into the e-commerce leader in South Korea since launching its site a little over a decade ago. It now has almost 18 million active customers, who spend an average of $284 each quarter through its various services.
Coupang has won the South Korean e-commerce market for multiple reasons, but the most important is its vertically integrated delivery and order fulfillment strategy. By investing billions of dollars in warehouses and hiring thousands of delivery drivers, Coupang can source and fulfill all of its orders within its own network, similar to how Amazon operates. This was expensive to build up but now gives Coupang a competitive advantage over any other e-commerce sellers.
With a 42 million-square-foot infrastructure footprint at the end of 2021, Coupang can offer overnight and one-day shipping to its 18 million customers. This advantage is why Coupang has grown its market share in the South Korean e-commerce market every year since 2017. Management is on pace to spend just under $1 billion on capital expenditures just in 2022, which will further widen Coupang's economic moat.
Opportunity in a beaten-down stock price
Coupang went public during the 2021 bull market at a massive market value of $100 billion. But amid the current bear market in IPOs and technology companies, the stock has been on a downward trajectory ever since.
The stock is down 64% since its IPO and now trades at a market cap of just $31 billion. The falling stock price provides a great opportunity for long-term investors because Coupang's business has only improved over the last few years.
Last quarter, Coupang generated $5.1 billion in net revenue, up 27% year over year on a constant-currency basis, putting it on pace to generate around $20 billion in sales this year. The South Korean e-commerce market was estimated to be $196 billion in 2021 and is set to grow to $291 billion in 2025, according to Coupang's own estimates. If the company can continue gaining market share, it will have well over 20% of the South Korean e-commerce market by then, which would equate to $58 billion in annual sales.
Long term, Coupang's management thinks it can hit a 7% to 10% adjusted earnings margin. Assuming the company hits the low end of this guidance in 2025, that would equate to $4 billion in annual adjusted earnings. Compared to its market cap of $31 billion, that is a forward adjusted price-to-earnings (P/E) ratio of just 7.75 -- well below the market average, even today.
With a strong track record of growth, a cheap stock price, and a huge market opportunity within the South Korean e-commerce market, I think Coupang stock is a great stock to own in 2023.
