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The global e-commerce market is expected to be worth $4.9 trillion in 2021. Further, the sector’s sales are expected to increase to $6.4 trillion by 2024. Another important data point for Coupang (NYSE:CPNG), South Korea’s largest e-commerce company, is that the Asian country’s e-commerce sales are expected to rank in the top five in the world this year, and CPNG stock gives investors exposure to the high-growth South Korean market.

Strong Growth and Ample Opportunities

Source: Ki young /

Another interesting fact about South Korea is its 96% internet penetration rate and  94% smartphone penetration rate. As a comparison, China’s internet penetration rate is only 54%. Therefore, South Korea may be among the most attractive markets for digital commerce.

After touching a high of $69 in March, CPNG stock closed yesterday at $38.58.  For longer-term investors, however, CPNG stock still looks attractive.

As I mentioned earlier, Coupang is a top performer in South Korea’s e-commerce market. As of 2020, the company had a market share of 24.6%.

From $4 billion in 2018, the company’s revenue swelled to $11.9 billion in 2020. Further, for the first quarter of 2021, Coupang reported that its  revenue had jumped 74% year-over-year to $4.2 billion. The company’s top-line growth has been robust; that’s one reason to like CPNG stock.

Coupang’s Positive Catalysts

Coupang is in the South Korean retail, consumer food service, and grocery markets. The firm reportedly plans to enter the nation’s travel sector.

The company believes that the combined sales of these segments came in at $470 billion in 2019 and will jump to $534 billion by 2024.

Therefore, Coupang’s top-line gains will probably remain strong in the next few years.

As of March 2021, Coupang reported that it had cash and cash equivalents of $4.3 billion. Given the ample funds it has in the wake of its initial public offering, the company is well-positioned for rapid growth.

International expansion will also probably boost Coupang’s top line. In April 2021, Coupang expanded into Singapore, the company’s first overseas foray. Considering the growth opportunities in the Southeast Asian market, Coupang is likely to spread its wings further with regional expansion.

Another key positive catalyst for CPNG stock is the increase in Coupang’s EBITDA margin. For 2018, Coupang reported an EBITDA margin of -24%.

In 2020, the e-commerce giant’s EBITDA margin was  -2.1%. Coupang’s EBITDA margin will probably  turn positive this year.

As the firm’s profitability and cash flow increase, CPNG stock is likely to trend higher.

It’s worth noting that a couple of years ago, the company launched a flat-fee membership program that features unlimited free shipping and same-day delivery. Going forward, the revenue from Coupang’s membership fees can help boost its cash flows.

Furthermore, the company’s net revenue per active customer rose from $127 in 2018 to $256 in 2020. This increase will probably boost its margins.

Final Thoughts on CPNG Stock

Alongside its revenue gains from its existing customers, Coupang reported that its active customer base had climbed 21% YOY in Q1. As the company grows, its EBITDA margin will expand.

In the U.S. and China, e-commerce has proven to be a cash flow machine. Consequently, I expect Coupang to report healthy free cash flows in the next few years.

Analysts have an average rating of “overweight” on CPNG stock with a mean price target of $44,  nearly 20% above yesterday’s closing price of $38.58.

However, I believe that the stock is likely to rally once the company’s EBITDA margin turns positive. That milestone is very likely to be reached in the next 6-12 months.

If the company aggressively expands overseas, however, its margins are likely to remain depressed as its sales, marketing and labor costs climb.

But Coupang’s positives still outweigh its negatives.

On the date of publication, Faisal Humayun did not have (either directly or indirectly) any positions in any of the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the Publishing Guidelines.

Faisal Humayun is a senior research analyst with 12 years of industry experience in the field of credit research, equity research and financial modelling. Faisal has authored over 1,500 stock specific articles with focus on the technology, energy and commodities sector.

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