With Coupang’s best-in-class logistics network, Korea could become the central hub for luxury goods in that region, transforming the way not only how Koreans buy lux (and they buy a lot) but also how the rest of the region buy, including China. Let’s first look at the luxury goods market, the largest segment of the overall luxury industry, which was estimated to be over $1.4 trillion globally in 2023. The latest Bain-Altagamma Luxury Goods Worldwide Market Study forecasts increased resilience to recession and continuous expansion for the rest of the decade to 2030, even amid economic turbulence and possible wars.
Jonah is looking for companies with 100%+ upside over the next 2-3 years. I’m also curious to see what they do with Farfetch and how much information they are willing to share in the earnings press release and conference call. I believe Farfetch has a market cap of $25+ billion at the peak a few years ago, and then last month, CPNG basically bought them for $500 million, plus some debt and a bag of donuts.
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There’s no need to try to attempt to justify it otherwise, this is a simple fact. And investors will go from risk-seeking to risk-averse without a moment’s notice. This shows that its nascent businesses, termed Developing Offerings, actually increased their losses by a significant amount. And this is detracting from Coupang’s overall profitability.
Therefore, it was clearly going to deliver a strong performance, with solid revenue growth rates. I will further speculate that Coupang could turn Farfetch into a luxury powerhouse in the Asian region, including China, a crucial market for the long-term future of the entire luxury industry. Historically, millions of tourists from Asia flooded major European shopping districts every year. Europe is still the go-to place for luxury goods shopping, not only for Asians but also for tourists from the US and the Middle East. The primary reason is that most luxury brands originate from Europe, and prices there are usually lower than in the rest of the world.
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Although Coupang is making great efforts to continue growing as a business, there hasn’t been much expansion in other countries, but this might be just a matter of time. Coupang used to rely on a group of subcontractors to be able to ship and deliver their orders, but in January this year, the company also launched Coupang Logistics, thus bringing its wide fulfillment network in-house. Coupang has become one of the largest ecommerce companies in the world. It has grown exponentially in the last couple years without any sign of stopping soon. Coupang Play is a streaming service that offers movies, news, original series, sports and event live-streamings. “What you really need to know is whether or not in the business environment of Korea and e-commerce can they be able to generate a huge, profitable return on capital,” Daniel Yoo, head of global asset allocation at Yuanta Securities, said on CNBC early Thursday.
- I am a former Wall Street wealth advisor and portfolio manager turned entrepreneur and full-time investor/trader.
- There are plenty of reasons why the stock price did not move much for over two years, but I believe now its time has finally come, and I will outline why further in this write-up.
- But their policy is that workers do not work more than five days a week and they do not work more than 52 hours per week.
- Coupang currently offers its Korean audience one of the most revolutionary door-to-door services in the world, which is supported by its exclusive technology.
- Total e-commerce spending was $128 billion in 2019, which is expected to grow to $206 billion by 2024, implying a CAGR of approximately 10%.48 Total e-commerce spend for all Internet buyers in Korea.
Part of those benefits are actually stock options as part of this IPO process. So, based on what I read and what I’m seeing, I feel like they are trying their best to deal with the culture issue that is coming out about the working requirements that it takes to have a business this large, becoming the largest delivery provider in Korea. But in my opinion, it’s somewhat mitigated by the steps that they’ve taken to decrease hours and ensure better working conditions.
This also creates incentives for other merchants, especially SMEs, to not only join the Coupang platform (I assume most of them are already there) but also move their fulfillment and logistics to FLC (Fulfillment and Logistics by Coupang). This part of the business has been growing more than twice as fast as the overall business. Coupang also sources a large proportion of merchandise directly from manufacturers, which can result in better customer pricing.
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Personally, I’d be surprised if CPNG can get EBITDA margins to 17.5% in CY2027, but I’m not sure they need to in order to get net income margins to 7% by CY2027. Furthermore, there are several tailwinds for sector growth, the primary one being that Gen Zs, the largest demographic group in most countries, are finally reaching the stage of their lives when https://www.day-trading.info/ they can afford luxury goods. There are plenty of reasons why the stock price did not move much for over two years, but I believe now its time has finally come, and I will outline why further in this write-up. Before I dig into my investment thesis, for transparent purposes, I have a 2.6% position in my investment portfolio, which I opened just recently.
Coupang Eats became more popular during the Covid-19 lockdown and was once the most downloaded application in Korea. This means buying into cheap companies at the moment when their narrative is changing and the business is on a path toward becoming significantly more profitable https://www.investorynews.com/ over the next year. In conclusion, as I assess Coupang’s recent Q results, I’m drawn towards its low valuation of 14x forward EBITDA for its core business. So, even though the business is optically extremely profitable, it won’t ever trade at a US-like multiple.
About CPNG Stock
The trucks and the operation belong to Coupang, a start-up founded by a Harvard Business School dropout that has shaken up shopping in South Korea, an industry long dominated by huge, button-down conglomerates. In a country where people are obsessed with “ppalli ppalli,” or getting things done quickly, Coupang has become a household name by offering “next-day” and even “same-day” and “dawn” delivery of groceries and millions of other items at no extra charge. As a result, the e-commerce market in this country has grown tremendously over the past decade, reaching almost $200 billion in 2023. It is set to double by 2030, expanding at a CAGR of approximately 11%. I expect Coupang will continue to grow its market share despite significant competition and slower customer growth. Net other revenue also includes consideration from online restaurant ordering and delivery services performed by Coupang and advertising services provided on its apps or websites.
Personal luxury goods have seen impressive growth since the pandemic, despite China’s luxury market stall during this period. However, most industry analysts expect the Chinese luxury market to have already recovered, while Southeast Asia and South Korea have been excelling in both growth and future potential. And I https://www.topforexnews.org/ don’t mention India, whose luxury market could expand by 3.5 times by 2030. In addition to these offerings, Coupang is also rapidly growing its advertising business, which offers opportunities to advertise on its websites and mobile applications, including banner advertisements, joint promotions, and other programs.
I may trim this position before earnings because I’m slightly worried about margin compression from the Farfetch acquisition, which could spark a sell-off post-earnings (I will cover this more below). The business model of Coupang categorizes its revenue as (1) net retail sales and (2) net other revenue. While there are attractive tailwinds for commerce in Korea, it is also one of the world’s most competitive and fastest-moving retail markets. To be successful, existing and new entrants must appreciate Korea’s demanding consumer preferences. For online offerings, this extends to building and tailoring an e-commerce solution surpassing innovation in other mature retail markets, such as the United States.
Coupang understands the challenges of all online shopping platforms, whether long shipping times or limited selection for faster delivery. In response, the company has developed a business model focused on creating an integrated technology and infrastructure system to enhance the customer experience. Before I dig into it more, I must mention that Coupang allocated around $400 million to Developing Offerings in 2023, including some capital to build out the logistics in Taiwan to replicate its domestic success in other Southeast Asian markets. I would rather have the company focus on its domestic market and expand its offerings there.
