CPNG - Coupang Q4 2023 Earnings: Healthy Top-Line Growth Intensifying Competition A Big Question On The Recent Acquisition

2024-03-30 05:56:26 ET

Summary

• Coupang reported solid earnings results. Product commerce's profitability improved and developing offerings demonstrated impressive growth.
• However, management anticipates a larger loss from the developing offerings segment due to increased investments in Taiwan.
• Chinese e-commerce players have intensified the competition. In our view, Coupang will likely maintain its market leadership thanks to its superior logistics capabilities.
• We question the rationale behind the acquisition of Farfetch. It remains to be seen how Coupang will transform it into a profitable business amid heightened competition.
• We believe the growth potential has been fully priced in. A successful execution of turning Farfetch profitable and international expansions could change the equations, despite several key risks mentioned below.

Recap

In our last article on Coupang ( CPNG ), we highlighted Coupang's strong position in logistics as a key factor in driving its market share growth. Additionally, we observed robust growth in Taiwan, surpassing the growth seen in South Korea post-Rocket launch. Yet, we believe that Coupang's stock was trading within its fair value at $18 per share, which was derived from a 10-year DCF valuation model (12% WACC, 3.5% terminal growth).

Since our article was published, the stock price experienced a temporary decline to $14 per share, subsequently recovering to $18 per share. This significant drop was largely attributed to the market's reaction to Coupang's acquisition of Farfetch, a luxury e-commerce company....

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