If you look hard enough, there are still artificial intelligence (AI) stocks trading at low prices. You just have to look beyond headline stocks like Nvidia or Palantir Technologies. One example is Coupang (CPNG 0.27%), an e-commerce and delivery company serving the South Korean market. The stock is well off its initial public offering (IPO) price from 2021 despite huge growth of the business.
Here's why Coupang is the ultimate growth stock to buy with $1,000 right now.
NYSE: CPNG
Key Data Points
An overstated data breach scandal
The stock is currently in a 40% drawdown from its 12-month high and 60% from the time of its IPO in 2021. The recent pain is due to fallout over a customer data breach, which has turned into a scandal in South Korea. A Coupang worker from China leaked customer information, and although it didn't reveal much sensitive data, this is a larger deal in South Korea compared to Western markets.
While Coupang may face some pressure from the South Korean government and customers this quarter, a one-time data leak is not going to ruin its superior value proposition for Korean shoppers. With ultra-fast shipping and a wide selection of products, the company has seen steadily rising customer adoption in Korea over the last decade. In 2020, it had 15 million active customers. Last quarter, that had grown to just under 25 million.
More important is the expansion of spending per active customer as its e-commerce services become a regular shopping habit for people in South Korea. Last quarter, revenue per product commerce active customer grew 7% year-over-year to $329 in constant currency. In a few years, shoppers probably will have forgotten this data breach. What they will remember is Coupang's very convenient e-commerce platform.
Image source: Getty Images.
The avenues to expansion
To keep driving growth, Coupang is expanding into new markets and adding new services for customers.
The second country it now operates in is Taiwan, which is growing rapidly (albeit from a small base). Revenue growth is in the triple digits, according to management. Using the same vertically integrated delivery network it built in Korea, Coupang looks poised to repeat its success in South Korea by tailoring its services to the Taiwanese customer.
New services include increased investments in Coupang Play (its video streaming service), Coupang Eats, and R.Lux (its luxury shopping service). South Korea has some of the highest spending on luxury goods per capita, if not the largest, which makes R.Lux and Coupang's overall apparel/luxury opportunity quite large.
By expanding its product selection, the company can improve its value proposition for existing customers. By launching in new countries, it will add customers to its platform. Both actions will drive the e-commerce flywheel for Coupang, leading to consistent revenue and earnings growth.
CPNG PS Ratio data by YCharts; PS = price to share.
Why Coupang stock is a buy now
After this drawdown, Coupang now trades at an ultra-cheap price compared to its forward earnings potential. It is not generating huge profits right now, but that is due to its reinvestments for growth. Revenue is up more than 100% in the last five years and should keep growing impressively in 2026 and beyond.
Let's dissect what I mean by a low price using some valuation math. Right now, the company has a market cap of $37 billion. Its trailing revenue is $34 billion, which grew 20% year over year in constant currency last quarter. Over the long term, Coupang believes its consolidated profit margin can expand to 10% or higher.
On today's revenue figure of $34 billion, that is $3.4 billion in earnings, which is a price-to-earnings ratio (P/E) of 11. But what if Coupang keeps growing revenue in the double digits? If revenue rises by an average of 10% over the next five years, it will reach $55 billion. A 10% margin on that revenue figure is $5.5 billion in earnings, or a forward P/E under seven.
Coupang is also cash flow positive and beginning to repurchase its own stock. Add it all up, and it looks like a premier growth stock at a dirt cheap price.
