About Coupang

Coupang is a company that seemed really popular with the analysts and has since become uninteresting.

Our team at MacroHint enjoys it when the pundits aren’t obsessing over a company’s stock and when the company isn’t constantly being discussed or even scrutinized 23 hours of the day. We also find it interesting when investment legends such as Stanley Druckenmiller and Bill Ackman own or have recently owned or have kept considerable portions of a company’s stock.

While both of these observations aren’t sufficient bases for buying a company’s stock, they do spark our interest and prompt us to ask ourselves questions like “what do they see in it that I don’t?” or “will I regret not picking up shares of this company’s stock later?”

Let’s try figuring this out together.

First of all, many, including the pundits have referred to Coupang as the “Amazon of South Korea.”

Those who make this comparison don’t appear to be too far off.

In fact, Coupang is a Korean e-commerce company that since being founded in 2010 has grown to become the largest online marketplace in South Korea. Like Amazon, the company offers same-day and next-day delivery services to its customers.

While this e-commerce company has dominated the Korean market, it will be interesting to see how and how well Coupang can or will penetrate the American market and global market as a whole.

At first glance, trying to go up against the largest e-commerce company in the world and simply one of the largest companies in the world, Amazon is no small feat even for Coupang. As a small aside, this is one of the reasons our team thinks this could be a reason for Amazon to possibly acquire Coupang in the next few years. This would likely be a huge windfall for investors in Coupang’s stock.

Nevertheless, putting aside our acquisition predictions, let’s analyze Coupang and see whether or not the stock is worth considering investing in currently and/or for years to come.

Coupang’s stock financials

First off, Coupang’s stock price has been in a nosedive in recent history. Specifically, the stock traded at around $48 in mid-March 2021 and is now currently trading at around $16.

Nevertheless, if the numbers are solid and the future for growth and expansion overseas is promising, there could be a lot of opportunity in Coupang’s stock.

The company currently has a market capitalization of nearly $30 billion, it doesn’t pay out an annual dividend to shareholders and is not currently profitable.

So much for opportunity, right?

Wrong.

There are a few companies that we view favorably that aren’t yet profitable; DoorDash is one of them.

While not yet profitable, our team has performed a lot of due diligence on the company, its business model, its revenue streams and how these will possibly fit (or not) in the future. The moral of the story is even though you shouldn’t automatically count out a non-profitable company’s stock, you should also be aware and objective regarding the risks associated with this and be as knowledgeable about the company as you can before investing and while you’re invested.

According to the company’s balance sheet, the company has around $8.6 billion in total assets and nearly $6.5 billion in total liabilities. This makes sense given that this company is still really young, is expanding operations and product lines aggressively and is likely financing a considerable amount of their activities through debt. As long as the company’s executive team is good at managing and employing debt, they should be fine, barring any extraordinary negative impacts from the recession.

Onto Coupang’s income statement, their total revenue has grown substantially over the last five years. Specifically, their total revenue stood at around $2.4 billion in 2017 and has since risen (each year) to nearly $18.5 billion in 2021. While we assumed that the company had strong revenue growth in recent years, its assuring to us that they seem to be acquiring more and more customers as the convenience economy has continued to develop overseas.

A question that must be answered and that will potentially play a drastic role in the success or failure of the company is how they adapt and appeal to consumers across the world going forward. Our team is slightly concerned with the company’s competition overseas as well as the heightened potential for geopolitical risk(s) in but more specifically near the company’s home region. While the company’s growth thus far has been nothing short of impressive, there are only so many consumers in South Korea and billions of others they need to reach, from our perspective.

These are two major factors that can impact how they reach or if they can reach current and new customers in the future.

However, if these can be sufficiently tended to and dealt with over the long run (although they are big “ifs”) we think the company will be able to successfully translate its current business model in other countries and regions.

Coupang’s stock fundamentals

As expected, the company’s trailing twelve month (TTM) net profit margin is negative, currently standing at -5.10% according to TD Ameritrade’s platform, compared to the industry’ average of 1.22%. As prospective shareholders and curious investors, we obviously hope the company inches closer and closer to a positive TTM net profit margin. Regardless we are excited that the company’s profit margin is as close as it is to the competition’s average.

Additionally, the company’s TTM returns on equity, assets and investment are also all in the red, respectively standing at -41.63%, -11.93% and -24.72%.

Our team believes it will take continued growth and just as important, time, to improve these currently negative net margins and returns. However, we do think this stock should be categorized or understood to be a somewhat risky investment given the current growth stage the company is in combined with the prevailing global, macroeconomic conditions.

Coupang is far from blue chip but it could get there one day.

Should you buy Coupang stock?

Coupang is an incredibly interesting company that has capitalized tremendously (and likely will continue to do so) from the growth in consumer demand for convenience and timely delivery.

However, while there are risks associated with investing in any stocks, Coupang currently holds more than the average established publicly traded company.

Given all of the aforementioned information, our team currently gives Coupang a “hold” rating.

DISCLAIMER: This analysis of the aforementioned stock security is in no way to be construed, understood, or seen as formal, professional, or any other form of investment advice. We are simply expressing our opinions regarding a publicly traded entity.