If you are wondering what Coupang (NYSE: CPNG) is and why it’s up 25% in a single day that’s easy. The company is an eCommerce company focused on South Korea and it just reported a profit. The news has the stock up more than 25% in intraday trading and it could go higher but don’t get too excited about that. The stock is a volatile one and has seen many 20% days over the past year. The company IPO’d as recently as 2021 and, with its business boosted by the pandemic, so was its share price. The stock has corrected more than 66% in the few months since but now the market looks a little different. The Q3 results suggest the company is about to blossom and it is an attractive investment.
“Our continued progress is a reflection of billions of dollars invested over the past seven years to build an unrivaled network that integrates technology, fulfillment and last-mile logistics,” said Bom Kim, founder and CEO of Coupang. “We will continue investing in process optimization and automation, including machine learning and robotics, to deliver even richer experiences and lower prices for our customers.”
Coupang, Not Just Another eCommerce Business
If you are thinking that Coupang is just another eCommerce business or, a little better, just another eCommerce platform think again. The company got its start in 2010 and has been aggressively building out its platform, offerings and networks to become the largest operator in South Korea and one that serves the greater Asian markets and the US. The company is NYSE-listed and has been likened to Amazon in its scope because it is an end-to-end solution for merchants. It provides not only the digital storefront but the logistics to back it up and the services to make it all run smoothly.
The remarkable thing about the Q3 results is that they are mixed but in that special kind of good way that shows the underlying business is getting stronger in the face of general economic uncertainty. What this means is that Q3 revenue of $5.1 billion, which is up 9.9% YOY on an as-reported basis and 27% on an FX-neutral basis, fell short of the Marketbeat.com consensus estimate but was offset by margin strength. The revenue strength was driven by a strong 28% gain in product sales that was offset by a mighty FX headwind. The takeaway, however, is that gross margin improved by 800 basis points versus last year and earnings strength carried through to the bottom line.
The company’s gross profit increased by 64% versus last year and drove a high-double-digit increase in net income, adjusted net income and operating margin. The operating margin, it is worth mentioning, came in above 0.0% and produced GAAP earnings for the first time since the IPO which is also strikingly reminiscent of Amazon. The takeaway is the company can produce profits, the question is if it will continue to invest in the business or allow some of that money to trickle down to the bottom line.
The Analysts Are Buying Coupang
The 11 analysts rating Coupang have it pegged at a Moderate Buy which is up from a Hold last year. The price target, which is down 50% YOY but firm in the near term, is about 11% above the current action so there is so upside in the outlook. If the analysts like the results they may push the market higher. If not, the stock may have already hit resistance and is headed sideways from here. The top of the range is currently near $21 if that level can’t be broken investors should be ready for this stock to dip and possibly as low as $16. 
