Shares of technology company Coupang (CPNG +2.83%) have been under pressure over the past few months. The company is based in the United States, but makes money serving consumers in South Korea and increasingly Taiwan, so Coupang is insulated from the direct effect of President Donald Trump's new import tariffs. Let's weigh this company's strengths against its weaknesses to see if it could be a good stock to buy at its recently beaten-down price.
NYSE: CPNG
Key Data Points
Why Coupang stock fell
What's been driving Coupang stock down? In a nutshell, investors aren't thrilled about profits that shrank significantly last year. The amount of free cash flow its operations generated in 2024 declined by about 42% to $1 billion.
In addition to profits that shrank dramatically, investors have been concerned about South Korean President Yoon Suk Yeol's impeachment, new tariffs on products entering the U.S. market, and how this all might affect the company.
Reasons to buy Coupang now
Coupang's profits shrank because the company is investing heavily in its future. New distribution centers in Taiwan are weighing on profits now, but those locations could allow it to become the leading provider of rapid grocery delivery as it did in the South Korea market.
The company acquired an international luxury goods e-commerce platform called Farfetch last January. Even if you exclude contributions from the new business, total revenue rose 23% in 2024 at constant-currency exchange rates.
American investors often compare Coupang to Amazon, but it's important to realize an important difference. South Korea houses around 50 million people in a mountainous territory roughly the size of Ohio. Across the country, middle-class neighborhoods feel as densely populated as Midtown Manhattan.
By building just 100 fulfillment centers, Coupang was able to bring 70% of the country within 7 miles of a fulfillment center. With its distribution infrastructure in place, margins are improving rapidly. The company's gross profit margin expanded by 3.8% to reach a very healthy 29.2% in 2024.
The Farfetch platform will serve customers in Coupang's South Korean market, plus it opens up some international growth avenues. The largest suppliers using Farfetch are from the U.K. and Italy, while its largest customer bases are in the U.S. and the U.K.
Product commerce sales aren't the only growth driver at Coupang. The company's developing offerings segment, which includes financial services, grew fourth-quarter revenue by 136% if you exclude Farfetch's contribution.
Reasons to remain cautious
Korea and Taiwan are mainly export-driven economies. If the Trump administration's tariff policies have the intended effect of returning factory jobs to the U.S., many of Coupang's customers could lose their jobs.
Coupang also faces competition. If it only took 100 fulfillment centers to reach 70% of South Korean customers, it probably won't be too hard for Coupang's lead competitor, Naver, to build a similarly effective distribution network.
Naver has been Korea's most popular search engine for decades. That puts it in a great position to compete with Coupang for online shoppers. In 2024, revenue from Naver's commerce segment grew by 15% to reach $2.1 billion. Over the same time frame, Coupang reported a slightly slower 13% gain in product commerce revenue.
At $26.7 billion last year, Coupang's e-commerce business dwarfs Naver's, but the well-heeled conglomerate could be a fierce competitor down the road. Naver recently partnered with Kurly, a fresh grocery deliverer, which could help it pull grocery shoppers away from Coupang's platform.
A buy on the dip?
With less than $1 billion in long-term debt and about $5.9 billion in cash on its balance sheet, Coupang is relatively well positioned to weather a temporary tariff-fueled economic downturn if necessary.
Coupang stock has been trading for around 38.4 times trailing free cash flow. That's a lofty valuation, but it isn't unreasonable for a business with expanding profit margins that expects to grow total revenue by 20% this year.
Adding some shares of beaten-down Coupang stock to a diversified portfolio now looks like a smart move for investors with a strong risk tolerance.
