South Korean e-commerce behemoth Coupang (CPNG -2.60%) has seen its stock rise over 15% following news of a 58% price increase for its Wow membership fee. Despite these gains, which have added to the stock's steady climb in 2024, Coupang may still offer 16% upside over the next year, according to Citi analyst John Yu.

I recently listed four reasons why Coupang is a buy -- before Yu hiked his price target to $26 and upgraded the stock to buy -- and I can't help but agree with him.

Coupang's ample funding for its growth ambitions

Coupang Wow members will now receive free shipping, 30-day returns, grocery delivery, discounts on restaurant orders and deliveries, and streaming content for approximately $6 per month. Though the $2 price increase sounds diminutive, spread across the company's 14 million Wow members, it packs a punch.

Yu believes the price increase will create $400 million in additional earnings before interest, taxes, depreciation, and amortization (EBITDA) annually, reinforcing management's focus on improving margins. Coupang's net profit margin has improved sequentially in seven of the last eight quarters, rising from negative 8% to 6%.

The company generated $1.4 billion in net profits over the last year, and this potential $400 million boost should move margins higher. Equally important for investors, Coupang generates strong free cash flow (FCF). After bringing in $1.8 billion in FCF last year, the company's cash balance sits at $5.5 billion.

Armed with this growing cash hoard, Coupang can self-fund new growth ideas. Recently, the company expanded into Taiwan, seeing faster adoption and growth rates there than when it launched in South Korea.

This massive cash buffer also provides financial flexibility for Coupang as it integrates the $500 million buyout of Farfetch, a luxury goods platform. While a risky bet, as Farfetch has yet to reach profitability, the acquisition is an intriguing long-term investment as South Koreans spend more per capita on luxury goods than any other country.

Ultimately, Coupang's growing cash hoard could prove Yu right, becoming a powerful source of growth optionality over time.