Don't waste your time looking for the next Amazon (AMZN +2.02%). There's only one Amazon, but chances are its days of gargantuan growth were years ago.
Nevertheless, there's always another company touted as a contender for the throne. The current favorite of some investors appears to be Coupang (CPNG +1.62%), a South Korean-born company that moved to Seattle in 2022.
NYSE: CPNG
Key Data Points
Much of the comparison springs from the similarities between the two companies' business models. For example, like Amazon, Coupang stresses fast, reliable customer service from its warehouses to your doorstep. According to the company, it has enough fulfillment centers positioned throughout South Korea so that there's at least one within seven miles of 70% of the country's population.
Why are investors so bullish on Coupang?
There was plenty of good news in Coupang's first-quarter earnings report. Net revenue was $7.1 billion, up from $6.6 billion the previous quarter.
Year-over-year, net revenue rose 23%, improving to $7.1 billion from $5.8 billion. If you eliminate the effect of the foreign exchange rate, the increase jumps to 28%.
As you would expect, Coupang's quarterly revenue was nowhere near that of Amazon's, which was $143.31 billion. However, Coupang's 23% year-over-year revenue growth shows how rapidly young companies can grow compared to well-established market giants. For the same period, Amazon reported a gain of 12.5%.
One notable setback was the earnings per share due to the purchase of upscale fashion marketplace Farfetch (FTCH +0.00%). Diluted earnings per share dropped from $0.05 to $0.00 year-over-year.
Meanwhile, Coupang doubled its operating cash flow over the trailing 12 months, from $1.2 billion to $2.4 billion. Over the same period, free cash flow grew from $0.5 billion to $1.5 billion. The available cash gives the company freedom to invest in ideas for improving and expanding.
Amazon's operating cash flow remained stable at $4.06 over the same 12-month period, while its free cash flow posted a 296.6% increase, finishing at $18.99 billion.
Should you be cautious about Coupang's growth opportunities abroad?
The company's store of cash signals strength to most investors. But while readily available cash can be a sign of health and efficiency, it's not necessarily an indication that a business is on the brink of rapid growth like a young Amazon.
Coupang's success in South Korea ignited a desire to expand abroad. The company started offering services in Taiwan in 2022 and opened its second fulfillment center there in late 2023.
However, the little island nation was not an untapped market. The Taiwanese e-commerce arena is overflowing with players, including American and Chinese heavy hitters Amazon, eBay (EBAY +0.36%), and Alibaba (BABA +3.53%).
The strength of the competition is evident when you consider that the aforementioned famous names aren't even the country's dominant players. Besides the international mega-sellers, Coupang has to battle local market leaders Shopee (SE +5.24%) and Momo (MOMO +1.20%).
Coupang will likely try to distance itself from the competition by relying on its Amazon-like approach. The company buys in bulk, stores the products in its warehouses, then offers the items at a discount. Coupang will likely try to use those low prices to lure shoppers away from their current favorite e-commerce site.
The question is how much money will Coupang need to spend to gain a worthwhile market share? Regardless of the amount of money spent, there's no guarantee of success as Coupang learned in Japan. The company withdrew from Japan in 2023.
Why should you monitor how Coupang handles Farfetch?
Coupang also has to revamp its new acquisition, Farfetch, which failed to remain profitable in the online luxury fashion space. Farfetch aims to be a one-stop shopping site for clothing items from famous brands.
After spending $500 million and taking a hit to its earnings per share, Coupang will have to find a way to make Farfetch a worthwhile acquisition. Part of that process could include spinning off some of Farfetch's branded assets, such as Off White and Stadium Goods.
Is now the time to invest in Coupang?
So, should you invest in Coupang now while there's still a buzz surrounding its stock? Coupang deserves praise for its success, but it shouldn't be considered a sure-fire hit to make someone a millionaire.
If you're looking for a steady money-maker with an eye on international expansion, you should give Coupang a good look. But you might want to leave your money in your pocket until you see how well it performs in Taiwan.
Coupang hasn't released numbers revealing its market share in Taiwan, but if its venture is successful, you should expect to see the construction of new fulfillment centers there.
However, Taiwan isn't the only place to focus your attention. You might also want to wait and see what Coupang does with Farfetch.
The intense interest that took Coupang's stock price from $13.84 at the close of Feb. 5 to $23.65 at the close of May 7 might not last, but the firm's basic financials should remain sound. If so, patient investors might be able to add a stable company to their portfolio at a reduced price.
