Week to date, shares of Coupang (CPNG -0.52%) were up 14% as of 10:38 a.m. ET on Friday, according to data provided by S&P Global Market Intelligence. Korea's largest e-commerce company reported another quarter of accelerating revenue growth that sent the shares higher, but its relatively small footprint of the retail market spells more growth.
Coupang reports fourth consecutive quarter of accelerating growth
Low growth expectations can set up a stock to soar when a company's financial results are better than expected. That's what happened with Coupang this week. The company reported its fourth consecutive quarter of accelerating revenue growth, driven by a 16% year-over-year increase in active customers.
Management credited investments it made years ago, such as fulfillment and logistics, for driving strong results. Small businesses are finding value in Coupang's fulfillment service, where participating merchants were up 80% over the year-ago quarter.
Why buy Coupang stock
Slowing growth in 2022 had sent the stock down almost 80% from its previous peak, so investor expectations have been low. Investors have also had to process the rationale for Coupang's recent acquisition of online luxury goods marketplace Farfetch, which has struggled to generate profitable growth.
However, the returns it is seeing from investments in its core business might earn management the benefit of the doubt. Coupang's top-line momentum shows it is on course to join the ranks of other top e-commerce companies that have delivered superior returns to shareholders.
With only a small share of the retail markets in Korea and Taiwan, the stock could be a good value at these lower share prices compared to where it traded just a few years ago.
