Is CPNG Stock a Solid Long Term Investment?

Stock Market

Coupang is a South Korean e-commerce company. Chances are good that interested individuals can guess that it is based out of Seoul, which is the cultural, economic, and political center of the country. However, it is interesting to note that Coupang is incorporated in the U.S. state of Delaware. Business-wise, Coupang is one of those e-commerce companies that became notable for running an online marketplace before spreading into other fields. There are those who have called it the South Korean version of Amazon, which is a helpful comparison in some respects but not in others. To name an example of this being helpful, Coupang is as dominant in its home country as what one would expect. To name an example of this being not so helpful, Coupang is nowhere near as mature as Amazon. Something that interested individuals should keep in mind when choosing their investments.

How Does Coupang Make Money?

As mentioned earlier, Coupang became notable for running an online marketplace. However, that wasn’t what it started out as. Instead, Coupang was once a daily deals business, meaning that it was closer to Groupon than to Amazon. That changed when the founder Bom Kim realized that e-commerce was becoming more and more important. In response, he pivoted towards auctions, which proved to be a smart move. For proof, look no further than the fact that Coupang surpassed $1 billion in sales in three years’ time. Even so, that number wasn’t enough for Kim, who pivoted a second time towards an online marketplace that would cover the entire shopping process from end to end.

For those who are unfamiliar, this was a much more ambitious change. After all, if Coupang wanted to establish such an online marketplace, it would need to create a great deal of infrastructure. This is particularly true because South Korea’s postal system apparently had a poor reputation, meaning that it couldn’t be relied upon for the sheer number of deliveries that would be happening. Infrastructure is expensive, which isn’t even mentioning the other complications that can come up in the course of creating it. Still, it seems safe to say that Coupang has been successful in this regard. More than 99 percent of the orders sent out through Coupang Rocket Delivery are delivered within a single day’s time. That kind of speed wouldn’t be possible without the 200 warehouses as well as the other examples of infrastructure that have been built up. In any case, Coupang’s growth enabled it to start offering other products and services as well. For instance, it delivers food. Specifically, there is Rocket Fresh, which is meant for the delivery of fresh food. Furthermore, there is Coupang Eats, which is meant for the delivery of restaurant food. Other than these, Coupang has Coupang Play as well, which is a subscription-based streaming service built around the assets acquired from the liquidation of the Singapore-based Hooq. Much of its content comes from other companies. Still, the streaming market being what it is, interested individuals should have no problem guessing that Coupany Play is working on original content as well. Competition is fierce for every single one of these things, so the company needs ways to stand out for both current customers and potential customers. Advertising is a source of revenue for Coupang as well. After all, people spend a lot of time making use of its website, so it makes sense that pretty much every single page has advertisements that are targeted towards them. This advertising works in much the same way as the advertising for similar companies, coming in a wide range of formats for a wide range of contexts.

Why Would You Want Coupang As a Long-Term Investment?

Different people want long-term investments for different reasons. Sometimes, they might be betting that the stock will see a significant rise in the long run even if it is going up-and-down in the present time. Other times, they might be more interested in collecting dividends while still benefiting from the upward potential of stocks. Whatever the case, interested individuals need to have a clear idea of what they want whenever they choose long-term investments because that is how they can separate suitable stocks from unsuitable stocks. If people are interested in Coupang, they won’t be interested in its stock for the latter reason. Simply put, the company doesn’t pay dividends, which to be fair, makes sense because it is an up-and-coming company rather than a mature company. As such, it needs to invest its money in its operations rather than hand out that money to its investors. Instead, if people are interested in Coupang, they are going to be interested in its stock because they are willing to make a bet on its potential in the long run. There is recent reason to be optimistic in this regard. However, that may or may not be enough for interested individuals.

It Isn’t Profitable

Coupang isn’t profitable. In fact, the company has never been profitable ever though it was founded in 2010. To be fair, this kind of thing isn’t that unusual. There are some companies that can become profitable within a short time of them starting up. Unfortunately, that isn’t the case for other companies, which need to be prepared to eat loss after loss while they build up their operations. This is the reason that start-ups are so interested in funding. After all, that money won’t be used for just fueling their expansion. Instead, that money will also be used for sustaining their operations in that initial phase. Of course, companies aren’t guaranteed to become profitable in the long run. There are plenty of examples that have fallen flat on their face, whether because they had an unviable idea, poor planning, or poor implementation. As such, there is always a risk that interested individuals need to take into consideration.

A Lot of Investors Have Become Irritated By the Lack of Profitability

People might have heard about Coupang’s stock doing poorly in 2021. To an extent, that happened because of investors being fed up by the company’s lack of profitability. Yes, there are a lot of investors who are willing to wait things out. However, there are also a lot of investors who are understandably irritated by the fact that Coupang has never made a profit even though it has been around for more than a decade’s time. This is particularly true because the company isn’t showing consistent movement towards profitability, which would provide them with increased assurance that their investment is viable in the long run. To name an example, its revenues increased by 48 percent in Q3 of 2021 on year. Simultaneously, its net loss increased by 87 percent in the same period on the same basis. It isn’t hard to see why that might be considered cause for concern.

The Recent Upswing Was Caused By a Positive-Looking Quarterly Report

Very recently, Coupang has seen something of an upswing in its stock price. This was caused by a positive-looking earnings report for the first quarter of 2022. Coupang’s revenues didn’t rise as much as what investment analysts had expected. They were $5.12 billion, meaning that they fell short of expectations by about $130 million. Still, Coupang’s revenues saw a 22 percent increase when using a year-on-year basis. Meanwhile, Coupang’s net loss also missed investment analysts’ expectations. However, this time around, they did so in a positive rather than a negative manner. This is because the company’s net loss went from $295 million to $209.3 million, which works out to $0.12 a share. That might not sound very impressive, but interested individuals should know that $0.12 a share was better than expectations by $0.16 a share. In other words, this is an excellent reminder that everything needs to be evaluated within its context. On its own, those numbers don’t seem very impressive; within its context, that upswing in Coupang’s stock price becomes much more understandable.

Its Stock Price Remains Low

Despite this, Coupang’s stock price is still below its IPO stock price. Something that says much about just how far it has fallen in recent times. There are those who might see this as reason to get involved sooner rather than later. After all, buying low, selling high is one of the fundamental rules of stock investing. However, interested individuals should also keep in mind that there are always reasons why a stock price is that low. They may or may not be deterred by those reasons because different people have different appetites. Still, they should definitely look into what is going on so that they can actually make an informed decision on the matter.

There Is Concern About Coupang’s Ability to Become Profitable

Unsurprisingly, there is concern about Coupang’s ability to become profitable. It is improving on its margins. A fact that interested individuals should see as cause for some optimism because that will be an extremely influential factor in whether the company can become profitable or not. However, there are also those who are concerned about Coupang’s potential for further expansion. On the one hand, South Korea is supposed to be very receptive to e-commerce, so much so that it is one of the countries that are most willing to make online purchases in the entire world. On the other hand, Coupang is so dominant in the South Korean market that about half of the population has downloaded its app. That means that the company is very secure in its home market. Simultaneously, that causes people to fear that it will be difficult for the company to make further progress throughout the rest of the South Korean market. Having said that, Coupang doesn’t have the same kind of dominance when it comes to every single one of its services. To name an example, its share of the South Korean market for restaurant deliveries is much lower, so that is something that interested individuals are keeping a watchful eye on. In any case, Coupang is currently expected to become profitable in 2024. Assuming that its numbers in subsequent quarters seem like they are making progress towards that direction, it seems reasonable to speculate that its stock price will rise with them.

There Is Concern About Coupang’s Employee Treatment

Coupang’s capabilities are very good. Being able to make more than 99 percent of Rocket Deliveries within a single day’s time isn’t the kind of thing that can exist without that being the case. However, concerns have been raised about Coupang’s employee treatment, which strengthens the comparison with Amazon. In fact, a lot of the stories will be familiar to those who have been paying attention to the latter’s employee treatment. For example, claims of employees being forced to work at such a punishing pace that they find it difficult to go to the bathroom. Similarly, claims of employees being treated like more like components of an overarching system than living, breathing humans. Coupang actually got quite a bit of negative attention in 2020 because of a doubling in work-related injuries and illnesses, though that hasn’t really been much of an impediment to its continuing forward motion.

Should You Invest in Coupang?

Ultimately, interested individuals are going to need to make up their own minds on whether they want to invest in Coupang or not. They should definitely make use of financial experts to supplement their understanding of what is going on. However, they are going to need to make up their own minds based on their own investment goals at the end of the day because they are the ones who should know themselves the best.

Similar Posts

Leave a Reply

This site uses Akismet to reduce spam. Learn how your comment data is processed.