Coupang (CPNG, Financial) surged by 5% to reach multi-year highs after receiving a double upgrade from Bernstein, moving from "Underperform" to "Outperform." This upgrade follows four additional upgrades from other brokerages in 2024.
The South Korean e-commerce giant, often compared to Amazon (AMZN, Financial), has experienced a significant rebound this year after a prolonged correction post-IPO in 2021. CPNG has risen over 60% year-to-date, driven by strong quarterly performance. Despite a brief decline after its Q2 report fell slightly short of revenue expectations, shares rebounded as investors focused on positive quarterly trends.
- In Q2, CPNG's Product Commerce segment, accounting for 97% of FY23 revenues, saw steady double-digit growth in active customers. Although new customers spend less initially, their increasing numbers bolster long-term revenue prospects.
- CPNG's marketplace growth has surpassed overall business growth for 13 consecutive quarters. This indicates that third-party sellers, primarily small and medium-sized businesses (SMBs), are thriving, despite varied regional demand. This trend bodes well for the latter half of FY24.
- The Developing Offerings segment, though minor, is gaining momentum. This includes Eats, akin to DoorDash (DASH, Financial), which saw a nearly 30% year-over-year volume increase in Q2. Additionally, Farfetch, a recent acquisition, is nearing positive adjusted EBITDA by the end of 2024.
While CPNG no longer operates in the pandemic's favorable conditions, its strategic adjustments during 2022 and 2023 are proving effective. Although not consistently profitable yet, CPNG's margins are improving, with Q2 gross margins at 28.3%, excluding Farfetch, marking a 220 basis-point increase year-over-year. The company expects further margin growth in upcoming quarters, alongside accelerating top-line growth. With a steady influx of new customers and improving economic conditions, CPNG sees significant upside potential. Management estimates the South Korean commerce market at $560 billion, viewing it as fragmented and ripe for disruption by CPNG.
