Editor's note: This article has been updated to clarify that Coupang is a technology company headquartered in the U.S., and that they serve multiple additional markets outside of South Korea.
Coupang (CPNG 1.09%), a U.S. based technology company and the leading e-commerce platform in South Korea, has disappointed early investors following its Mar. 2021 debut. The company priced its IPO at $35.00, and shares opened at $63.50 on their first day of trading. However, the stock trades at $23.00 per share as of this writing.
It initially dazzled investors with its rapid growth, but the bulls retreated as they fretted over macroeconomic and competitive challenges. With a market capitalization of $42 billion, Coupang trades at just 1.2 times its projected sales for 2025. Here's what may lie in store for the company this year.
Image source: Getty Images.
A recap of 2024
Coupang served 22.5 million customers across its core e-commerce marketplace in Q3 2024. It also operates a logistics network with fulfillment centers located within seven miles of 70% of South Korea's population, and its Rocket Wow subscription service -- which offers faster delivery options, free returns, streaming video, food and grocery delivery, and other perks -- reached 14 million members at the end of 2023. The technology company serves customers in 162 markets worldwide.
Over the past year, revenue growth accelerated as Coupang gained more active customers, expanded its Coupang Eats platform, and rolled out more Wow features to boost its revenue per active customer. It also expanded into Taiwan to curb its dependence on the Korean market while acquiring the struggling online luxury retailer, Farfetch. All of those tailwinds offset the currency headwinds from a strong dollar, which reduced its reported revenue growth by 6 percentage points in its latest quarter.
|
Metric |
Q3 2023 |
Q4 2023 |
Q1 2024 |
Q2 2024 |
Q3 2024 |
|---|---|---|---|---|---|
|
Revenue growth (YOY) |
21% |
23% |
23% |
25% |
27% |
|
Active customer growth (YOY) |
14% |
16% |
16% |
12% |
11% |
|
Net revenues per active customer growth (YOY) |
7% |
6% |
(1%) |
1% |
4% |
|
Gross margin |
25.3% |
25.6% |
27.1% |
29.3% |
28.8% |
|
Adjusted EBITDA margin |
3.9% |
4.5% |
4.3% |
4.5% |
4.4% |
Data source: Coupang. YOY = year over year.
Coupang's gross and adjusted EBITDA margins have trended higher as it expands its third-party marketplace, integrates Farfetch's luxury products, optimizes its supply chain, and automates more of its services.
Those rising margins countered the bearish notion that Coupang would struggle to keep up with domestic challengers like Naver, the South Korean search engine that also operates an online marketplace. They also suggest its business is sustainable: It finally turned profitable on a generally accepted accounting principles (GAAP) basis in 2023, and analysts expect it to stay in the black for the foreseeable future.
What's next for Coupang?
Coupang will report its Q4 2024 results in February, but analysts expect full-year revenue growth of 25% as adjusted EBITDA dips 9%. But for 2025, they expect revenue and adjusted EBITDA to rise 15% and 150%, respectively. Based on that outlook, it looks reasonably valued at 21 times on an enterprise value to EBITDA basis.
Yet that valuation is likely still influenced by South Korea's ongoing political instability, an economic slowdown, and the strong U.S. dollar. Elevated interest rates are also driving investors away from riskier overseas stocks, while growth-oriented investors might favor higher-growth e-commerce markets like Latin America.
As South Korea resolves its domestic issues this year, more investors should pivot back toward Coupang. Shares were up 36% last year, and the company has the fundamentals to support another winning year. Investors should brace for continued volatility, though.
