Coupang (CPNG +0.16%) stock, which had been trading above $25 in mid-February, sank to less than $20 in early April amid the market's negative reaction to President Donald Trump's tariffs. However, as of this writing, it sits at $28.45, a level it hadn't seen since the end of 2021.
The South Korea-based e-commerce and technology company has kept growing its market share in its home market, and it's beginning to successfully expand into another country. Yet even with Coupang's market cap now surpassing $51 billion, there is still plenty of room for its stock to run in 2025 and through the rest of the decade.
Image source: Getty Images.
The South Korean Amazon
Shoppers in South Korea are flocking to Coupang. It has more than 20 million accounts in the country, which has a population of 52 million, and many of those accounts represent households with multiple people. Why is the platform seeing so much success? Because Coupang has built up an incredible e-commerce shipping system.
It offers same-day delivery, as well as overnight delivery by 7 a.m. for orders placed by midnight the day before. Returns can be handled simply by leaving an item in a Coupang reusable package outside your door. The free delivery for groceries and food delivery services it offers are much better than even Amazon manages. All this is included for a cheap monthly subscription to its Rocket Wow program, which also includes a streaming video service.
NYSE: CPNG
Key Data Points
Through scale, automation, and brute-force efficiency, Coupang has been able to offer this incredible shopping experience while still generating positive cash flow.
On $31 billion in revenue over the past 12 months, the company has generated $1 billion in free cash flow. This was with revenue growing by 21% year-over-year on a currency-neutral basis and gross profit growing 31% year-over-year last quarter.
South Korea's annual retail spending amounts to hundreds of billions of dollars, so the company has a ton of room to keep expanding in its home market.
Adding another country with high growth potential
Management is not stopping at South Korea. It recently launched the Coupang e-commerce model in Taiwan with great success. The business segment that houses the Taiwan unit grew its revenue by 78% year-over-year last quarter to $1 billion on a currency-neutral basis.
While that segment is unprofitable today, Taiwan -- a rich and densely populated nation of around 23 million people -- is a similar market in many regards to South Korea -- and customers there will likely quickly come to appreciate the Coupang model.
Taiwan and the rest of what Coupang calls its "developing offerings" segment lost $168 million in adjusted EBITDA (earnings before interest, taxes, depreciation, and amortization) last quarter, which was a headwind to its consolidated profits. However, I believe these expansions will drive a long-term advantage for Coupang. Management can funnel some of the profits it reaps in South Korean e-commerce to build up scale in Taiwan, which should eventually have similar economic characteristics to its home market.
This expansion adds tens of billions of dollars to Coupang's addressable market, and Taiwan is only the second country it has launched its e-commerce platform in so far.
CPNG Revenue (TTM) data by YCharts.
Why Coupang stock still has room to run
I believe the party is just getting started for Coupang stock. Its South Korean e-commerce sales should keep rising steadily in the years to come, while Taiwan will deliver explosive growth.
Adding to the appeal for investors is that the Korean won has recently been appreciating versus the U.S. dollar, which will make Coupang's revenue and profits more impactful for American investors.
The company also got a bargain deal when it acquired the Farfetch luxury shopping platform out of bankruptcy. Its offerings should be well-suited to the South Korean market, which spends relatively heavily on fashion and luxury.
Add everything together and I think Coupang is well on its way to $50 billion in revenue and eventually $100 billion in annual sales by the end of the decade. Management is guiding for its profit margin to reach around 10% at scale, which would equate to $10 billion in annual earnings on $100 billion in revenue.
In all likelihood, Coupang's market cap will approach $200 billion or higher if the company generates $10 billion in annual income. That would be a price-to-earnings ratio (P/E) of around 20 -- not a demanding earnings multiple for investors to expect.
Today, its market cap is barely over $50 billion, so this calculation points to the stock gaining 300% or more over the next five years. In that light, the stock looks like a buy for long-term investors even after its bump so far this spring.
