welcom to America today with a new article about 2 reasons the smartest investors are watching this stock, dubbed the “Amazon of Korea”
Investors in Coupang(NYSE: CPNG), South Korea’s biggest e-commerce company, have had a challenging time over the last few years. The company went public on March 11, 2021, at $35 per share and closed at an all-time high of about $50 later that month. But in the subsequent months and years, it slowly gave up all those gains and more.
Still, despite the uninspiring stock performance, some of the most intelligent investors in the market are keeping a close eye on this company, and for good reasons.
Background of the “Amazon of Korea”
Coupang is a Korean e-commerce company in the format of an online marketplace, commonly known as “Korea’s Amazon”. It is the largest and fastest-growing e-commerce player in Korea. The company was launched in 2010 by Bom Kim, a Harvard Business School graduate. In 2013, an interview with CEO Bom Kim on TechCrunch was able to trace initial seed funding of $18 million prior to launching the website in 2014. In November 2018, Coupang was reported to have a valuation of $9 billion after raising $2 billion in funding. Coupang has a similar business model to Amazon and conducts most of its business in South Korea. The company is based on a simple concept of revolutionizing the consumers’ shopping experience by introducing a fast and easy online marketplace, with tier 1 goods at a low price. Coupang introduced a new method of e-commerce called T-Moni, which allows customers to pay upon delivery of their goods, ensuring that customers would be satisfied with the quality of their purchase.
The Korean e-commerce company has been investing heavily in their technology platforms to improve customer service, in order to stand out from their competitors. One of their biggest achievements involves their end-to-end logistics automation facility. Coupang automated their logistics with their newly developed patent “MVM and CPM”, which sorts and stores items by considering how frequently they are purchased together. This allows delivery staff to become more efficient when providing the morning service, which is a unique delivery concept in Korea because it allows customers to place their orders by 11:59 pm and be provided with the convenience of having their orders delivered to their home before 7 am. This concept has since set a new standard for both Coupang and its competitors.
Coupang just reported its first profitable year
The last few years have been a roller-coaster ride for Coupang. It all started when the pandemic hit in 2020, sending its already high growth rate to the stratosphere. Revenue jumped by 90% in 2020, and by 54% in 2021.
As its revenue rose, losses expanded sharply, too. Its net loss more than doubled from $697 million in 2019 to $1.5 billion in 2021. However, that was acceptable for investors, because they could see Coupang was investing heavily to acquire new users and improve its logistics infrastructure. They also expected its hyper-growth trajectory to be the new normal.
But the company’s growth arc quickly shifted in 2022 as consumers largely resumed their brick-and-mortar shopping habits. That year, its revenue grew by just 12%. Investors were shocked and, understandably, sold off the stock.
Beyond that growth slowdown, there were other issues that Coupang had to deal with at this point. One of those was the rapid decline in the availability of easy money due to rising interest rates. This impacted all high-growth but loss-making tech companies such as Coupang. For example, Sea Limited — the leading e-commerce company in South East Asia — pivoted from a growth-at-all-costs strategy to one that emphasized survival and self-sufficiency. Coupang had to do the same.
Besides, investors also shifted their focus, moving away from loss-making businesses with potential and toward profitable and well-established companies. So Coupang had no choice but to change course to prove that its business model was sustainable (and could be profitable).
Fortunately Coupang’s move — while resulting in slower revenue growth — produced one huge positive: a massive decline in losses, which fell from $1.5 billion in 2021 to $92 million in 2022. The e-commerce business performed even better in 2023, growing revenue by 18% and reporting a $1.4 billion net profit.
Positioned to grow profits from here
Coupang reached a massive milestone in 2023 by proving its business model could be profitable at scale. Better still, there are good reasons to expect the company to keep growing its profitability for the foreseeable future.
The main driver of profitability growth will be revenue growth. While Coupang is already the largest e-commerce platform in South Korea, with a 25% market share, its share of the country’s overall commerce market is less than 5%. Thus, it could rely on attracting new users and growing its existing users’ wallet share to expand its market share over time. For instance, the tech company has leveraged its infrastructure and consumer base to launch new services like online groceries, food delivery, streaming, etc.
Even if it has exhausted its domestic opportunity, Coupang can still grow its overseas business thanks to its investment in the Taiwan market. While these efforts are still in their early days, this investment has demonstrated encouraging user and revenue expansion results.
Another vital aspect of Coupang’s ongoing profit growth is to improve efficiency and operating leverage. Via its ongoing investment in the latest technology and infrastructure, the e-commerce company can ensure ongoing improvements in productivity across its supply chain.
Besides, as the company’s scale grows, its unit fixed costs will fall as it handles more volume with a similar asset base. These operational improvements will result in higher margins and, ultimately, profitability. For perspective, Coupang’s adjusted EBITDA (earnings before interest, taxes, depreciation, and amortization) margins have gradually improved over the years, going from negative 4.1% in 2021 to 4.4% in 2023. It has a long-term target margin of more than 10%.
coupang korea english site
What it means for investors?
Early investors in Coupang have suffered as the stock languished below its IPO price. Still, the “Amazon of Korea” has proven its viability and is well-positioned to grow its profits over time.
While it’s not for everyone, investors with the proper risk appetite could consider adding this growth stock to their watch lists.
Lawrence Nga has positions in Sea Limited. The Motley Fool has positions in and recommends Coupang and Sea Limited. The Motley Fool has a disclosure policy.
The Motley Fool is a USA TODAY content partner offering financial news, analysis and commentary designed to help people take control of their financial lives. Its content is produced independently of USA TODAY.
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The Potential of the “Amazon of Korea” Stock
Introduction
In the recent years, the potential of the “Amazon of Korea” stock caught the attention of the investors in the stock market. This shows how relevant the e-commerce market has become in the year of 2016. “The Amazon of Korea,” namely Coupang, has been making movement in the e-commerce industry of Korea. Coupang has made a massive success through their premium delivery services. The company promises a 24-hour delivery for items that have been purchased.
This comes with no extra cost or hidden charge for delivery, no matter the size or quantity of the items, the delivery cost will be the same. This promise has brought a big impact to the e-commerce industry and has changed the perception of consumers buying products online, as normally delivery of the items takes a few days and can be quite expensive, depending on the quantity. Coupang has also made big changes in selling fresh groceries online, with their service called ‘Coupang Fresh Market’.
This service also promises to deliver the fresh groceries within 24 hours and if the item is not fresh, the consumer can get a full refund on the spot by returning the item to the delivery person. With this promise, Coupang has made big success in selling fresh groceries online. These few factors have made Coupang the top e-commerce website in Korea and has achieved $3.8 billion revenues in 2016.
Due to the company’s success, it has also grabbed the attention of the investors, making them wonder how bright the future can be for this company. This leads to the topic of how potential is the “Amazon of Korea” stock in today’s market. With the company’s countless achievements and success, there is no doubt that they will want to improve further and expand to the international e-commerce industry.
The most important thing before investing in a company is to assess their past and future potential. In the case of Coupang, it is important to assess that Coupang has achieved $3.8 billion revenues in just a span of 7 years. This is an astounding achievement, as a start-up company, to achieve such high revenues in just a short time.
This shows how effective the company is growing and with the success, this will make all the employees and employers motivated and will most likely keep up the good work to improve the company. This can be a good sign for the stock investors as a successful growing company will most likely attract people to invest more in the stock. Although revenues don’t represent profit, the success of Coupang can be seen from the subsidies they have received from the government.
As of today, Coupang has received a total of $1.5 billion subsidies from the Korean government. This is due to the fact that Coupang has created thousands of job opportunities for the younger generations and also for their relentless effort to lower the youth unemployment rates in Korea and also to lower the poverty rate.
With the successes of achieving those government aids, it is a clear sign that Coupang has a big influence in changing the economy of Korea. These funds will be very beneficial for the company’s future to improve their services and expand to various industries. This can be seen when Coupang recently started investing a huge sum into the food delivery service business and they are planning to expand it overseas. With these few main points, we can somewhat assess the potential of Coupang stock as it is still far from what they have achieved today. And an investment in a successful growing company will most likely give a good return.
Significance of the Stock in the Market
Section 1.2 Significance of the Stock in the Market The significance of Coupang stock in the market is far-reaching. This is mainly because Coupang is the market leader in the e-commerce space in Korea and the stock is the first major stock of its kind to have a pure play exposure to the e-commerce sector. The stock is now a significant part of many ETFs and mutual funds that these investors use.
This is because the stock is now in the MSCI indices, which means that there are many active managers that are evaluated against these indices that will need to get exposure to Coupang stock. Inclusion in these indices will also lead to a sizable following from passive investors, increasing the depth of the investor base in this name.
This widespread investor base will ensure that Coupang stock will remain significant in the market for the foreseeable future. This is a change from the tech IPOs of the past few years, where many of the stocks are seen as speculative and have little fundamental backing. Coupang is a profitable company and is likely to attract strong interest from value investors who see this as a rare opportunity to invest in a quality growth story in the tech space.