Prediction: Coupang Will Beat the Market. Here's Why.

Sometimes you need to collect passport stamps to find unique investing opportunities. Coupang (CPNG -0.38%) is South Korea's leading e-commerce provider. It has a pretty dominant position with 23.6 million active customers. This may not seem like a lot, but it's about half of the country's adult population.

Despite posting nearly consistent double-digit revenue growth and turning profitable two years ago, Coupang is somehow still a broken IPO. The shares are trading 23% below their debutante price of $35 four years ago, and more than 60% lower than the all-time intraday high it scored the day it hit the market 50 months ago.

Despite the disappointing overall return, momentum is on its side now. Coupang is beating the market with a 24% year-to-date rise, and there's a clear path for the upticks to keep coming. I predict that Coupang can beat the market in the coming year and potentially longer than that. Let's take a closer look.

Voted moat likely to succeed

The best companies have moats that make it hard to be taken down by rivals and disruptive upstarts. Coupang has a genius moat. It's not just an app and website. It has set up more than 100 fulfillment centers across South Korea's densest areas, placing it within a seven-mile drive of 70% of the country's population. It has a fleet of drivers working overnight, making sure that most orders placed before midnight are either delivered the same day or before the sun rises the next morning. If this sounds a lot like Amazon, you're getting warm but Coupang could be getting even hotter.

Like Amazon, Coupang has a premium Prime-like subscription platform that offers free delivery and access to other digital goodies like streaming content and access to an online grocery store. It goes beyond Amazon in that it also offers home delivery of area restaurant orders. If you want to return something, you can just leave it outside your door and Coupang will swing by to pick it up.

If you're wondering how an online platform can rapidly evolve to the point where it already has half of a tech-savvy country on its side, it's all starting to come together. Coupang has built an e-commerce empire that will be difficult to duplicate at this point.

Image source: Getty Images.

Shopping for growth

Coupang is a better company now than it was when it went public four springtimes ago. Revenue has more than doubled. It's now profitable. It stumbled in its initial expansion into Japan, but it's holding up better in Taiwan as a secondary market. It also scored some global street cred early last year when it acquired European luxury apparel e-tailer Farfetch at a distressed price.

Is Coupang growing at the same pace that it was when it charged out of the IPO gate with back-to-back quarters of better-than-70% top-line growth? No. Growth has normalized at a lower pace now. Outside of one quarter at the end of 2022, revenue gains have been able to stay in the double digits.

Data source: Coupang. YOY = year over year.

Revenue growth accelerated organically through 2023. The theme was a bit different in 2024, with the Farfetch deal that closed in January of that year boosting quarterly sales by as much as 7%. Things should normalize again, but analysts are encouraged. They see Coupang's net revenue climbing 13% this year, accelerating to 15% come 2026. The bottom line is expected to grow substantially faster.

Building out its offerings, expanding into new territories, and rescuing Farfetch from the brink of bankruptcy doesn't come cheap. Profitability is here, but it is modest. Even if you look out to next year, Coupang stock is trading for 40 times projected adjusted earnings. However, everything that is holding Coupang back now on the bottom line are the best reasons to own Coupang. Investing in engagement and stickiness will only strengthen one of the best moats in e-commerce. Entering new territories may heighten the risks, but it also lifts the ceiling. The Farfetch deal wasn't popular at the time, but it's a foot in the door outside of its home turf.

Coupang knows what it's doing. This seems to be the year that investors are coming to the same conclusion.