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Is it the Right Time to Invest in Coupang?
Stock Analysis & Ideas

Is it the Right Time to Invest in Coupang?

Story Highlights

Coupang was listed in the U.S. in March last year for a record $4.6 million. Has the company been able to hold the rally or has it also been hit by inflationary and supply chain issues?

Coupang, Inc. (NYSE: CPNG), a South Korean e-commerce company, offers a variety of goods, including food, clothes, furniture, electronics, footwear, and nutrition products. Founded in 2010 and known as the “Amazon of South Korea,” the company also provides a video streaming service, delivery of prepared foods, and same-day delivery of general merchandise and grocery.

The company launched its initial public offering (IPO) in the U.S. in March last year and raised $4.6 billion. Its 130 million shares were picked up at a price of $35 per share. Since the IPO, the stock has been falling and has now reached $11.51.

Coupang announced its first-quarter results last month. Let’s take a look at how the company fared.

Q1 Results

The e-commerce giant reported a narrower-than-expected loss for the first quarter at $0.12 per share, compared with the Street’s estimate of $0.28 per share and the year-ago loss of $0.68 per share.

Net revenues increased 22% year-over-year to $5.1 billion, and gross profit jumped 42% to $1.04 billion. The adjusted EBITDA loss narrowed by $194 million quarter-over-quarter to a total of $91 million.

Gaurav Anand, CFO of Coupang, said, “We also recorded the highest gross profit and gross profit margin in the company’s history, which in turn helped our Product Commerce segment to achieve profitability in Q1. We expect our focus on customer-driven innovations as well as operational excellence to continue to bear fruit in the quarters and years ahead.”

Wall Street’s Take

Recently, Citigroup (NYSE: C) analyst John Yu maintained a Buy rating on the stock and raised the price target to $17 from $15 (47.7% upside potential).

Yu said, “Coupang has exposure to the fashion and accessory categories, but its main value proposition is in daily necessities, FMCG and grocery categories, on our analysis. In these categories, Coupang has unrivaled competitive advantages, thanks to its nationwide logistics infrastructure and Rocket Delivery service.”

Additionally, James Lee of Mizuho Securities reiterated a Hold rating on Coupang and lowered the price target from $28 to $18 (56.4% upside potential).

In a research note to investors, Lee said, “The company reported significantly less-than-expected EBITDA losses due to its disciplined investment approach articulated last quarter. However, the fiscal 2022 EBITDA guidance remained unchanged, indicating uncertainties in supply chain and inflationary impact.”

Overall, the stock has a Strong Buy consensus rating based on five Buys and one Hold. CPNG’s average price target of $22.67 implies 97% upside potential from current levels. Shares have lost almost 60% on a year-to-date basis.

Blogger Sentiment

TipRanks data shows that financial blogger opinions are 81% Bullish on CPNG, compared to the sector average of 68%.

Concluding Thoughts

Even though CPNG stock has lost 71% over the past year and 60.5% in the last six months, I am positive about the long-term prospects of Coupang as it continues to diversify and innovate in order to improve the consumer experience.

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