Investment Case Updated: May 16, 2025
Ticker: CPNG
Market capitalization: $48.2B
Enterprise value: $46.2B
Price: $26.56 (5/13/25)
What the Company Does
Dubbed the “Amazon” of Korea, Coupang is the leading e-commerce retail and logistics provider in the country. The company has over 100 fulfillment centers in Korea, with 70% of the nation living under 7 miles from a Coupang fulfillment center, enabling rapid delivery. In addition to selling owned inventory, Coupang sells advertising and goods from third-party merchants. It also provides restaurant ordering and delivery service through its Eats segment, while Coupang Play is a content-streaming service.
Why We Own It
Coupang is the dominant and leading player in a large addressable market with numerous growth levels at a compelling price. The company still holds a single-digit market share of Korea’s commerce market, which management expects to meaningfully exceed $500B in the future, providing a long runway for growth, as evidenced by Fiscal Year 2025 (FY25) guidance that calls for constant-currency revenue growth of 20%. Active customers on the company’s platform have nearly doubled between 2019 and 2024 to 22.8MM, while newer customer cohorts not only shop at higher initial levels of spend per customer than older cohorts, but also increase their spending levels at a faster rate than older cohorts over their ensuing years of shopping on the platform. The company’s Developed Offerings segment (includes Eats, Taiwan Operations, and Farfetch) represents an investment portfolio with compelling upside optionality, as segment revenues have grown from <$100MM in 2020 to ~$3.6B in 2024 (~21% of revenue). Management still sees a long runway for growth in both its Eats and Taiwan Operations due to low market penetration rates, and while the segment detracted ~$630MM from total FY24 Adjusted EBITDA (earnings before income, taxes, depreciation, and amortization), inflecting margins may be on the horizon, with management highlighting how Farfetch (~$4B in annual transaction volume) was operating at run-rate breakeven profitability as of year-end (vs. hundreds of millions in annual losses at time of acquisition). Further scaling the company's logistics business, which continues to grow at a high multiple of the overall business/ growth rate, and its higher-margin third-party marketplace business, should enable Adjusted EBITDA margins to expand from a company-record 4.5% in FY24 towards management's long-term target of 10% or more. Although shares trade at 18/4x next year's EBITDA estimates, a premium to its e-commerce peers' (AMZN, MELI, BABA, ETSY, EBAY, SE, JD, Naver) median multiple of ~9.3x, we believe this is justified given CPNG's superior growth profile, as analysts are forecasting CPNG to grow EBITDA at a 33.0% compound annual growth rate (CAGR) from 2024-2027, more than double the peer group median's expected growth. CPNG trades at a forward (FY26 consensus) Enterprise Value (EV)/Sales multiple of 1.2x, a 56% discount to the peer group median multiple, and near a level that historically marked a bottom for Amazon.
How Management Allocates Capital
Management follows a disciplined capital allocation approach, opting to invest only when they have conviction that the potential opportunities can reach meaningful scale with moat-like returns. The top priority remains investing in organic growth and gaining market share by delivering moments of “wow” for customers. CPNG has a low-risk balance sheet with cash exceeding debt by ~$2.0B, which, along with ramping free cash flow, should provide ample funding for the company’s reinvestment needs as well as flexibility for opportunistic Mergers & Acquisitions (M&A) and tapping into its $1B share buyback program (~2% of market cap).