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2021-08-23
Wow. Greqt
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Coupang: Strong Upside Potential
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Greqt<span>[呆住] </span></p></body></html>","htmlText":"<html><head></head><body><p>Wow. Greqt<span>[呆住] </span></p></body></html>","text":"Wow. Greqt[呆住]","highlighted":1,"essential":1,"paper":1,"likeSize":6,"commentSize":1,"repostSize":0,"favoriteSize":0,"link":"https://laohu8.com/post/835619573","repostId":1104828360,"repostType":4,"repost":{"id":"1104828360","pubTimestamp":1629709374,"share":"https://www.laohu8.com/m/news/1104828360?lang=&edition=full","pubTime":"2021-08-23 17:02","market":"us","language":"en","title":"Coupang: Strong Upside Potential","url":"https://stock-news.laohu8.com/highlight/detail?id=1104828360","media":"seekingalpha","summary":"Summary\n\nCoupang stock is undervalued compared to its peers.\nThe South Korean e-commerce market is t","content":"<p><b>Summary</b></p>\n<ul>\n <li>Coupang stock is undervalued compared to its peers.</li>\n <li>The South Korean e-commerce market is the 5th largest market in the world.</li>\n <li>Coupang's consumer satisfaction levels are quite high.</li>\n</ul>\n<p class=\"t-img-caption\"><img src=\"https://static.tigerbbs.com/19e691e63819b7b0620d306fda210b11\" tg-width=\"1536\" tg-height=\"862\" width=\"100%\" height=\"auto\"><span>metamorworks/iStock via Getty Images</span></p>\n<p>The South Korean e-commerce market has already achieved significant market penetration. Coupang(NYSE:CPNG)achieved significant consumer satisfaction with users ranking their shopping app higher than the average for South Korean apps. Coupang has a built very strong delivery network that enables the company to reach 70% of the South Korean population in less than 10 minutes. Relative valuation analysis indicates that the stock is undervalued and suggests we can expect strong double-digit returns in upcoming years.</p>\n<p>The E-commerce market has already achieved significant success in South Korea. Currently, South Korea is the 5th largest e-commerce market in the world surpassing $110 billion in total sales level throughout 2020.</p>\n<p class=\"t-img-caption\"><img src=\"https://static.tigerbbs.com/922b387d1db16de8bef4fdf97be12804\" tg-width=\"640\" tg-height=\"567\" width=\"100%\" height=\"auto\"><span>Source: emarketer.com</span></p>\n<p>South Korea has the second-highest e-commerce sales to GDP ratio at 6.8%, only beaten by China with a 15.6% ratio. At the same time, the country has the 3rdhighest e-commerce sales per capita ($2,135) after the UK and the USA.</p>\n<p class=\"t-img-caption\"><img src=\"https://static.tigerbbs.com/228f28a7ed066b1bd408696b8282fe0a\" tg-width=\"640\" tg-height=\"121\" width=\"100%\" height=\"auto\"><span>Source: Author Data taken:emarketer.com,World Bank GDP,World Bank Population</span></p>\n<p>South Korea has relatively high e-commerce penetration: about 72% of the population has used e-commerce services at least once. Though the percentage seems quite high, not all are using e-commerce frequently, and even active users are spending only a small proportion of their total budget on online shopping.</p>\n<p class=\"t-img-caption\"><img src=\"https://static.tigerbbs.com/c693b246783d1776bca4d504ed8d5369\" tg-width=\"640\" tg-height=\"845\" width=\"100%\" height=\"auto\"><span>Source: Visualistan.com</span></p>\n<p>The situation is going to change as the younger generations are inclined towards the digital world and readily adopt new online services. 94.7% of the 20-29 age group has used e-commerce platforms, while only 60.02% of the 50-59 age group has ever used e-commerce services. The spending power of the younger generations grow in line with their age, providing long-term sustainable growth opportunities for e-commerce players.</p>\n<p class=\"t-img-caption\"><img src=\"https://static.tigerbbs.com/40abd940c7c44fc18d7df77a7cc65113\" tg-width=\"640\" tg-height=\"337\" width=\"100%\" height=\"auto\"><span>Source: Statista</span></p>\n<p>South Korea has a high internet penetration rate with99.2%of households having internet access via PC, mobile or other devices. Mobile online purchases are the biggest growth engine for the e-commerce sector: online purchases via PC grew by only10.3%in the 2017-2018 period and 5.67% in the 2018-2019 period. At the same time, purchases made via mobile phones increased by 31.7% in the 2017-2018 period and by 19.84% in the 2018-2019 period. Mobile purchases make up 61.5% of total e-commerce sales. South Korea has the highest smartphone penetration in the world: 96% of the total population owns a smartphone compared to 89% in the USA and 71% in China.</p>\n<p>Coupang's mobile applications are among the top 20 of South Korean applications. Coupang’s Shopping app is the 13th most popular mobile app in South Korea according to the SimilarWebranking system in Apple's App Store(NASDAQ:AAPL), while Coupang Eats is 12th. At the same time, in the Google Play Store(NASDAQ:GOOG), the Coupang Shopping application is 15th. In South Korea,71.17% of mobile users use the Android operating system, while only 28.46% are iOS users. Thus, Google Play Store stats are more important for our analysis.</p>\n<p class=\"t-img-caption\"><img src=\"https://static.tigerbbs.com/c6eac4aab5f190785020e5bb169cfc8e\" tg-width=\"640\" tg-height=\"395\" width=\"100%\" height=\"auto\"><span>Source: Statcounter.com</span></p>\n<p>The Coupang shopping application has more than 583,000 reviews in the Google Play Store and the average rating is 4.2. More than 65% of users rated the app 5 stars. The rating of the app is significantly better than the average Korean app score of 3.39.</p>\n<p class=\"t-img-caption\"><img src=\"https://static.tigerbbs.com/110d6671b18364eb3e71854b583c9fc9\" tg-width=\"640\" tg-height=\"535\" width=\"100%\" height=\"auto\"><span>Source: Appgrooves</span></p>\n<p>E-commerce penetration in South Korea jumped significantly in 2020. In 2019, the penetration rate was 20.8%, while in 2020 the number increased to 25.9%. In this respect, South Korea is ahead of the USA (14%), the UK (23.3%) and China (24.9%). These statistics indicate that the South Korean market is one step ahead of other countries' markets. It is estimated that the South Korean e-commerce market will continue its fast-paced growth and reach $150 billion revenues in 2024. Analysts estimate an8% GMV CAGRduring the 2021-2024 period.</p>\n<p>Coupang is growing faster than the total industry as the company was able to increase its market share significantly in 2020. In 2019, the company had a market share of18.1%, while in 2020 Coupang's share had increased to 24%. Meanwhile, its main competitors could not grow their market share percentages in 2020. The main rivals of the company are eBay(NASDAQ:EBAY)owned Gmarket, WeMakePrice and Naver Shopping. According to Daniel Yoo, head of global asset allocation at Yuanta Securities, the company can increase its market share by exceeding a30% levelin upcoming years.</p>\n<p>Coupang was founded in 2010, and since then has achieved a significant market share in South Korea. One of the biggest contributors to this fast growth was their fast delivery. Coupang's logistics business, Rocket Delivery, allows consumers to receive their orders in less than 24 hours from ordering. The company has built a strong end-to-end logistics network using its 200 warehouses and more than 100 logistics centers. According to the management,70% of the South Korean populationis living within 10 minutes of a Coupang logistics center. It creates a significant moat for the business as competitors would need to invest large amounts of cash to build similar logistics networks. Recently, Coupang has launched the Dawn Delivery service which delivers goods by 7 a.m., if the order is placed by midnight the day before. More than 3.3 million items are being ordered on the Coupang platform every day and 99.3% of all items are being delivered within 24 hours. It is worth mentioning that the fast delivery service has been achievable because South Korea is so densely populated. South Korea is the 23rd most densely populated country in the world with a density ratio of512 people per 1 km square. 81.4% of the population are living in cities, making the country the39thmost urbanized in the world.</p>\n<p>Coupang's different segments are interconnected, as the growth of one segment is bringing tailwinds for other segments. Coupang is investing heavily to grow its 1P business (their inventory offering) by expanding its product base and improving the quality of the service. These investments increase the level of consumer satisfaction and bring a significant number of consumers to the 3P business (3rd party marketplace). New consumers in the 3P segment increase the interest in new merchants on the platform; this is further expanding product variety, creating economic moat and attracting new consumers. Sellers are urged to move from traditional retail stores because this market is declining by7% YoYin South Korea, while on Coupang's platform 3rd party merchants grow their sales by an average of 87% YoY. So, due to large investments in the 1P business and the consumer base expansion in the 3P business, Coupang’s total business has grown at twice the rate of the total South Korean market over the past 2 years.</p>\n<p>The company is actively encouraging more consumers to its platform: in Q2, the company recorded 26% active user growth, reaching17 million monthlyactive consumers. There seems to be a consumer base growth opportunity in South Korea, as it is estimated that there are about 37 million internet shoppers in the country. The company could not achieve significant growth by only expanding its consumer base, but it can record significant growth by increasing their revenue per consumer, which is still quite low. In the last quarter, the company managed to record a 36% revenue per consumer growth, due to the expansion of product and service bases.</p>\n<p>Coupang is also offering its employees incentives to invest their efforts into the growth of the business. Coupang is the first Korean company to make its frontline workers shareholders of the company: 39,000 employees got restricted stock awards at the IPO. Coupang employees are generally content with the firm as the company has a 4 out of 5-star rating. The CEO has a90% approvalrate, while 80% of employees would recommend joining the Coupang team to their friends. Employee’s rank \"career opportunities\" in the company a quite high, which is a very important factor to attract highly talented workers to the business.</p>\n<p class=\"t-img-caption\"><img src=\"https://static.tigerbbs.com/d6f732667289dcdc80244f6b7e8b4405\" tg-width=\"640\" tg-height=\"470\" width=\"100%\" height=\"auto\"><span>Source: Glassdoor.com</span></p>\n<p>Coupang recorded a $122 million EBITDA loss in Q2 2021. These losses come from investments in new segments of the company: direct investments in the Eats and Fresh segments amounted to $120 million in Q2. These investments seem quite justified as the new fields helped Coupang to record significant top-line growth. Particularly, the Fresh grocery revenues doubled in Q2 YoY, exceeding the $2 billion level, less than 3 years after its launch. Though the Eats and Fresh segments are not yet profitable, they are recording significant contribution margin improvements in recent quarters, and the management believes that they will replicate the profitability of the mature segments of the company. In the Fresh segment, the management was able to record a 1,000-basis point contribution margin improvement YoY, while in the Eats segment the loss per order decreased by 50% in last year. As the management sees low online penetration in these segments and high ROI opportunities, they are going to continue to invest aggressively to create long term value for investors.</p>\n<p>The growing scale of the business helps Coupang to improve profitability margins. The gross margin was only5.08%in 2018, while in the last quarter the company recorded a gross margin of 16.8%. However, the margin includes an inventory write-off of $158 million which was caused by a fulfilment center fire. Excluding the consequences of the fire, the company reported an $816 million quarterly gross profit, a 86% YoY improvement, and the adjusted gross margin is 18.2%.</p>\n<p>The company has significant opportunities to expand its business. One of the most interesting areas is fintech, as the company could provide consumers with its own payment platform to process their transactions, get loans for their purchases etc. LatAm, owner of the e-commerce business Mercadolibre(NASDAQ:MELI), realizes this opportunity quite successfully as athird of its revenuescome from the fintech segment. Coupang's management is rather cautious about this field as they prefer to invest in the e-commerce segment. Coupang's fintech offerings are at their early stages yet as the company tests opportunities in the sector. The management has a similar approach to international expansion. Currently, Coupang is working on business expansion in Japan and Taiwan, however, these initiatives are at their early stages and the management is not intending to invest large amounts of cash on these projects.</p>\n<p><b>Risks</b></p>\n<p>Cross border e-commerce growth is one of the biggest threats for the business as prices in South Korea are generally higher than foreign prices. In 2019, there were almost$3.1 billiononline purchases from foreign retail sites, growing 15% YoY. However, surveys indicate that the South Korean population is not overly concerned about high prices as only20% of online shopperspay attention to low-priced products.</p>\n<p>Every e-commerce player faces significant competition as the industry promises significant growth opportunities and companies invest heavily to grab their market share. Amazon(NASDAQ:AMZN)shows significant interest in the South Korean market as last year they announced their partnership with SK Telecom(NYSE:SKM). The partnership gives Amazon the right to obtain30% of 11Street, an e-commerce platform operating in South Korea, whose parent company is SK Telecom. In 2020, 11Street recorded revenues of $530 billion, which was about 14 times lower than Coupang's results. However, Amazon's partnership with the business will allow 11Street to introduce Amazon's products and services to its consumers which will create significant competitive advantages for the company.</p>\n<p><b>Valuation</b></p>\n<p>To calculate the intrinsic value of the stock we have used a relative valuation analysis. We have collected data on the world's 15 biggest e-commerce stocks to calculate the value of CPNG. The average P/S FWD ratio of the 15 biggest e-commerce companies is 7.99, while the median ratio is 4.25. Coupang's P/S FWD is 2.57, which indicates that the stock is trading at a lower multiple compared to its peers. Calculating the PSG ratio of competitors, we see that the average PSG is 20.96, while the median PSG is 17.4. Calculating Coupang's P/S FWD based on these multiples, and analysts' estimated revenue growth rate of50.2%, we get an average P/S FWD of 10.52 and a median of 8.73. These ratios are significantly higher than Coupang's 2.57 multiple. However, the low multiple reflects the low profitability of the business. The company reported a TTM gross margin of 16.63%, significantly lower than peers' average margin of 43.45%, thus we need to incorporate the low profitability of the business in our calculations also.</p>\n<p class=\"t-img-caption\"><img src=\"https://static.tigerbbs.com/6ae3e0938046e190132023d59e967802\" tg-width=\"640\" tg-height=\"126\" width=\"100%\" height=\"auto\"><span>Source: Author, Data:SeekingAlpha.com,Finviz.com,GuruFocus.com</span></p>\n<p>So, we have built a regression analysis where, for dependent variables, we have used natural logs of peers' estimated growth rates and TTM gross margins. As a result, we have an R Square of 55% and an F Stat of 7.34, which indicates that there is high statistical significance. Using coefficients of the regression equation, we get a P/S FWD ratio of 3.85, which is higher than Coupang's P/S FWD ratio of 2.57, and indicates that the stock is undervalued by 49%. So, we think that the intrinsic value of Coupang is $50; 12% higher than analysts' average price target of$44.7and 16.7% lower than analysts' highest price target of $60.</p>\n<p class=\"t-img-caption\"><img src=\"https://static.tigerbbs.com/a62c188e06bf9026705f537b306f13d3\" tg-width=\"640\" tg-height=\"123\" width=\"100%\" height=\"auto\"><span>Source: Author</span></p>\n<p>It is expected that the South Korean retail market will exceed$530 billionby 2024. Considering a 35% e-commerce penetration rate and Coupang securing a 20% market share we get a $37.1 billion revenue prediction for Coupang. Taking our P/S ratio of 3.85, and multiplying it by our assumed sales figures, we get a $142.8 billion implied market cap, which is 140% higher than the current market cap and indicates a 34% annual return opportunity.</p>\n<p><b>Conclusion</b></p>\n<p>The South Korean e-commerce market is growing quite rapidly. Coupang is the largest e-commerce player in South Korea partly because it managed to build a strong logistics network and delivers items quickly. Our valuation analyses indicate that the stock is undervalued by 50% compared to its peers, thus we see a strong price appreciation opportunity. We anticipate a 34% annual return until 2024, thus we assign a Buy rating to the stock.</p>","collect":0,"html":"<!DOCTYPE html>\n<html>\n<head>\n<meta http-equiv=\"Content-Type\" content=\"text/html; charset=utf-8\" />\n<meta name=\"viewport\" content=\"width=device-width,initial-scale=1.0,minimum-scale=1.0,maximum-scale=1.0,user-scalable=no\"/>\n<meta name=\"format-detection\" content=\"telephone=no,email=no,address=no\" />\n<title>Coupang: Strong Upside Potential</title>\n<style type=\"text/css\">\na,abbr,acronym,address,applet,article,aside,audio,b,big,blockquote,body,canvas,caption,center,cite,code,dd,del,details,dfn,div,dl,dt,\nem,embed,fieldset,figcaption,figure,footer,form,h1,h2,h3,h4,h5,h6,header,hgroup,html,i,iframe,img,ins,kbd,label,legend,li,mark,menu,nav,\nobject,ol,output,p,pre,q,ruby,s,samp,section,small,span,strike,strong,sub,summary,sup,table,tbody,td,tfoot,th,thead,time,tr,tt,u,ul,var,video{ font:inherit;margin:0;padding:0;vertical-align:baseline;border:0 }\nbody{ font-size:16px; line-height:1.5; color:#999; background:transparent; }\n.wrapper{ overflow:hidden;word-break:break-all;padding:10px; }\nh1,h2{ font-weight:normal; line-height:1.35; margin-bottom:.6em; }\nh3,h4,h5,h6{ line-height:1.35; margin-bottom:1em; }\nh1{ font-size:24px; }\nh2{ font-size:20px; }\nh3{ font-size:18px; }\nh4{ font-size:16px; }\nh5{ font-size:14px; }\nh6{ font-size:12px; }\np,ul,ol,blockquote,dl,table{ margin:1.2em 0; }\nul,ol{ margin-left:2em; }\nul{ list-style:disc; }\nol{ list-style:decimal; }\nli,li p{ margin:10px 0;}\nimg{ max-width:100%;display:block;margin:0 auto 1em; }\nblockquote{ color:#B5B2B1; border-left:3px solid #aaa; padding:1em; }\nstrong,b{font-weight:bold;}\nem,i{font-style:italic;}\ntable{ width:100%;border-collapse:collapse;border-spacing:1px;margin:1em 0;font-size:.9em; }\nth,td{ padding:5px;text-align:left;border:1px solid #aaa; }\nth{ font-weight:bold;background:#5d5d5d; }\n.symbol-link{font-weight:bold;}\n/* header{ border-bottom:1px solid #494756; } */\n.title{ margin:0 0 8px;line-height:1.3;color:#ddd; }\n.meta {color:#5e5c6d;font-size:13px;margin:0 0 .5em; }\na{text-decoration:none; color:#2a4b87;}\n.meta .head { display: inline-block; overflow: hidden}\n.head .h-thumb { width: 30px; height: 30px; margin: 0; padding: 0; border-radius: 50%; float: left;}\n.head .h-content { margin: 0; padding: 0 0 0 9px; float: left;}\n.head .h-name {font-size: 13px; color: #eee; margin: 0;}\n.head .h-time {font-size: 11px; color: #7E829C; margin: 0;line-height: 11px;}\n.small {font-size: 12.5px; display: inline-block; transform: scale(0.9); -webkit-transform: scale(0.9); transform-origin: left; -webkit-transform-origin: left;}\n.smaller {font-size: 12.5px; display: inline-block; transform: scale(0.8); -webkit-transform: scale(0.8); transform-origin: left; -webkit-transform-origin: left;}\n.bt-text {font-size: 12px;margin: 1.5em 0 0 0}\n.bt-text p {margin: 0}\n</style>\n</head>\n<body>\n<div class=\"wrapper\">\n<header>\n<h2 class=\"title\">\nCoupang: Strong Upside Potential\n</h2>\n\n<h4 class=\"meta\">\n\n\n2021-08-23 17:02 GMT+8 <a href=https://seekingalpha.com/article/4451167-coupang-strong-upside-potential><strong>seekingalpha</strong></a>\n\n\n</h4>\n\n</header>\n<article>\n<div>\n<p>Summary\n\nCoupang stock is undervalued compared to its peers.\nThe South Korean e-commerce market is the 5th largest market in the world.\nCoupang's consumer satisfaction levels are quite high.\n\n...</p>\n\n<a href=\"https://seekingalpha.com/article/4451167-coupang-strong-upside-potential\">Web Link</a>\n\n</div>\n\n\n</article>\n</div>\n</body>\n</html>\n","type":0,"thumbnail":"","relate_stocks":{"CPNG":"Coupang, Inc."},"source_url":"https://seekingalpha.com/article/4451167-coupang-strong-upside-potential","is_english":true,"share_image_url":"https://static.laohu8.com/e9f99090a1c2ed51c021029395664489","article_id":"1104828360","content_text":"Summary\n\nCoupang stock is undervalued compared to its peers.\nThe South Korean e-commerce market is the 5th largest market in the world.\nCoupang's consumer satisfaction levels are quite high.\n\nmetamorworks/iStock via Getty Images\nThe South Korean e-commerce market has already achieved significant market penetration. Coupang(NYSE:CPNG)achieved significant consumer satisfaction with users ranking their shopping app higher than the average for South Korean apps. Coupang has a built very strong delivery network that enables the company to reach 70% of the South Korean population in less than 10 minutes. Relative valuation analysis indicates that the stock is undervalued and suggests we can expect strong double-digit returns in upcoming years.\nThe E-commerce market has already achieved significant success in South Korea. Currently, South Korea is the 5th largest e-commerce market in the world surpassing $110 billion in total sales level throughout 2020.\nSource: emarketer.com\nSouth Korea has the second-highest e-commerce sales to GDP ratio at 6.8%, only beaten by China with a 15.6% ratio. At the same time, the country has the 3rdhighest e-commerce sales per capita ($2,135) after the UK and the USA.\nSource: Author Data taken:emarketer.com,World Bank GDP,World Bank Population\nSouth Korea has relatively high e-commerce penetration: about 72% of the population has used e-commerce services at least once. Though the percentage seems quite high, not all are using e-commerce frequently, and even active users are spending only a small proportion of their total budget on online shopping.\nSource: Visualistan.com\nThe situation is going to change as the younger generations are inclined towards the digital world and readily adopt new online services. 94.7% of the 20-29 age group has used e-commerce platforms, while only 60.02% of the 50-59 age group has ever used e-commerce services. The spending power of the younger generations grow in line with their age, providing long-term sustainable growth opportunities for e-commerce players.\nSource: Statista\nSouth Korea has a high internet penetration rate with99.2%of households having internet access via PC, mobile or other devices. Mobile online purchases are the biggest growth engine for the e-commerce sector: online purchases via PC grew by only10.3%in the 2017-2018 period and 5.67% in the 2018-2019 period. At the same time, purchases made via mobile phones increased by 31.7% in the 2017-2018 period and by 19.84% in the 2018-2019 period. Mobile purchases make up 61.5% of total e-commerce sales. South Korea has the highest smartphone penetration in the world: 96% of the total population owns a smartphone compared to 89% in the USA and 71% in China.\nCoupang's mobile applications are among the top 20 of South Korean applications. Coupang’s Shopping app is the 13th most popular mobile app in South Korea according to the SimilarWebranking system in Apple's App Store(NASDAQ:AAPL), while Coupang Eats is 12th. At the same time, in the Google Play Store(NASDAQ:GOOG), the Coupang Shopping application is 15th. In South Korea,71.17% of mobile users use the Android operating system, while only 28.46% are iOS users. Thus, Google Play Store stats are more important for our analysis.\nSource: Statcounter.com\nThe Coupang shopping application has more than 583,000 reviews in the Google Play Store and the average rating is 4.2. More than 65% of users rated the app 5 stars. The rating of the app is significantly better than the average Korean app score of 3.39.\nSource: Appgrooves\nE-commerce penetration in South Korea jumped significantly in 2020. In 2019, the penetration rate was 20.8%, while in 2020 the number increased to 25.9%. In this respect, South Korea is ahead of the USA (14%), the UK (23.3%) and China (24.9%). These statistics indicate that the South Korean market is one step ahead of other countries' markets. It is estimated that the South Korean e-commerce market will continue its fast-paced growth and reach $150 billion revenues in 2024. Analysts estimate an8% GMV CAGRduring the 2021-2024 period.\nCoupang is growing faster than the total industry as the company was able to increase its market share significantly in 2020. In 2019, the company had a market share of18.1%, while in 2020 Coupang's share had increased to 24%. Meanwhile, its main competitors could not grow their market share percentages in 2020. The main rivals of the company are eBay(NASDAQ:EBAY)owned Gmarket, WeMakePrice and Naver Shopping. According to Daniel Yoo, head of global asset allocation at Yuanta Securities, the company can increase its market share by exceeding a30% levelin upcoming years.\nCoupang was founded in 2010, and since then has achieved a significant market share in South Korea. One of the biggest contributors to this fast growth was their fast delivery. Coupang's logistics business, Rocket Delivery, allows consumers to receive their orders in less than 24 hours from ordering. The company has built a strong end-to-end logistics network using its 200 warehouses and more than 100 logistics centers. According to the management,70% of the South Korean populationis living within 10 minutes of a Coupang logistics center. It creates a significant moat for the business as competitors would need to invest large amounts of cash to build similar logistics networks. Recently, Coupang has launched the Dawn Delivery service which delivers goods by 7 a.m., if the order is placed by midnight the day before. More than 3.3 million items are being ordered on the Coupang platform every day and 99.3% of all items are being delivered within 24 hours. It is worth mentioning that the fast delivery service has been achievable because South Korea is so densely populated. South Korea is the 23rd most densely populated country in the world with a density ratio of512 people per 1 km square. 81.4% of the population are living in cities, making the country the39thmost urbanized in the world.\nCoupang's different segments are interconnected, as the growth of one segment is bringing tailwinds for other segments. Coupang is investing heavily to grow its 1P business (their inventory offering) by expanding its product base and improving the quality of the service. These investments increase the level of consumer satisfaction and bring a significant number of consumers to the 3P business (3rd party marketplace). New consumers in the 3P segment increase the interest in new merchants on the platform; this is further expanding product variety, creating economic moat and attracting new consumers. Sellers are urged to move from traditional retail stores because this market is declining by7% YoYin South Korea, while on Coupang's platform 3rd party merchants grow their sales by an average of 87% YoY. So, due to large investments in the 1P business and the consumer base expansion in the 3P business, Coupang’s total business has grown at twice the rate of the total South Korean market over the past 2 years.\nThe company is actively encouraging more consumers to its platform: in Q2, the company recorded 26% active user growth, reaching17 million monthlyactive consumers. There seems to be a consumer base growth opportunity in South Korea, as it is estimated that there are about 37 million internet shoppers in the country. The company could not achieve significant growth by only expanding its consumer base, but it can record significant growth by increasing their revenue per consumer, which is still quite low. In the last quarter, the company managed to record a 36% revenue per consumer growth, due to the expansion of product and service bases.\nCoupang is also offering its employees incentives to invest their efforts into the growth of the business. Coupang is the first Korean company to make its frontline workers shareholders of the company: 39,000 employees got restricted stock awards at the IPO. Coupang employees are generally content with the firm as the company has a 4 out of 5-star rating. The CEO has a90% approvalrate, while 80% of employees would recommend joining the Coupang team to their friends. Employee’s rank \"career opportunities\" in the company a quite high, which is a very important factor to attract highly talented workers to the business.\nSource: Glassdoor.com\nCoupang recorded a $122 million EBITDA loss in Q2 2021. These losses come from investments in new segments of the company: direct investments in the Eats and Fresh segments amounted to $120 million in Q2. These investments seem quite justified as the new fields helped Coupang to record significant top-line growth. Particularly, the Fresh grocery revenues doubled in Q2 YoY, exceeding the $2 billion level, less than 3 years after its launch. Though the Eats and Fresh segments are not yet profitable, they are recording significant contribution margin improvements in recent quarters, and the management believes that they will replicate the profitability of the mature segments of the company. In the Fresh segment, the management was able to record a 1,000-basis point contribution margin improvement YoY, while in the Eats segment the loss per order decreased by 50% in last year. As the management sees low online penetration in these segments and high ROI opportunities, they are going to continue to invest aggressively to create long term value for investors.\nThe growing scale of the business helps Coupang to improve profitability margins. The gross margin was only5.08%in 2018, while in the last quarter the company recorded a gross margin of 16.8%. However, the margin includes an inventory write-off of $158 million which was caused by a fulfilment center fire. Excluding the consequences of the fire, the company reported an $816 million quarterly gross profit, a 86% YoY improvement, and the adjusted gross margin is 18.2%.\nThe company has significant opportunities to expand its business. One of the most interesting areas is fintech, as the company could provide consumers with its own payment platform to process their transactions, get loans for their purchases etc. LatAm, owner of the e-commerce business Mercadolibre(NASDAQ:MELI), realizes this opportunity quite successfully as athird of its revenuescome from the fintech segment. Coupang's management is rather cautious about this field as they prefer to invest in the e-commerce segment. Coupang's fintech offerings are at their early stages yet as the company tests opportunities in the sector. The management has a similar approach to international expansion. Currently, Coupang is working on business expansion in Japan and Taiwan, however, these initiatives are at their early stages and the management is not intending to invest large amounts of cash on these projects.\nRisks\nCross border e-commerce growth is one of the biggest threats for the business as prices in South Korea are generally higher than foreign prices. In 2019, there were almost$3.1 billiononline purchases from foreign retail sites, growing 15% YoY. However, surveys indicate that the South Korean population is not overly concerned about high prices as only20% of online shopperspay attention to low-priced products.\nEvery e-commerce player faces significant competition as the industry promises significant growth opportunities and companies invest heavily to grab their market share. Amazon(NASDAQ:AMZN)shows significant interest in the South Korean market as last year they announced their partnership with SK Telecom(NYSE:SKM). The partnership gives Amazon the right to obtain30% of 11Street, an e-commerce platform operating in South Korea, whose parent company is SK Telecom. In 2020, 11Street recorded revenues of $530 billion, which was about 14 times lower than Coupang's results. However, Amazon's partnership with the business will allow 11Street to introduce Amazon's products and services to its consumers which will create significant competitive advantages for the company.\nValuation\nTo calculate the intrinsic value of the stock we have used a relative valuation analysis. We have collected data on the world's 15 biggest e-commerce stocks to calculate the value of CPNG. The average P/S FWD ratio of the 15 biggest e-commerce companies is 7.99, while the median ratio is 4.25. Coupang's P/S FWD is 2.57, which indicates that the stock is trading at a lower multiple compared to its peers. Calculating the PSG ratio of competitors, we see that the average PSG is 20.96, while the median PSG is 17.4. Calculating Coupang's P/S FWD based on these multiples, and analysts' estimated revenue growth rate of50.2%, we get an average P/S FWD of 10.52 and a median of 8.73. These ratios are significantly higher than Coupang's 2.57 multiple. However, the low multiple reflects the low profitability of the business. The company reported a TTM gross margin of 16.63%, significantly lower than peers' average margin of 43.45%, thus we need to incorporate the low profitability of the business in our calculations also.\nSource: Author, Data:SeekingAlpha.com,Finviz.com,GuruFocus.com\nSo, we have built a regression analysis where, for dependent variables, we have used natural logs of peers' estimated growth rates and TTM gross margins. As a result, we have an R Square of 55% and an F Stat of 7.34, which indicates that there is high statistical significance. Using coefficients of the regression equation, we get a P/S FWD ratio of 3.85, which is higher than Coupang's P/S FWD ratio of 2.57, and indicates that the stock is undervalued by 49%. So, we think that the intrinsic value of Coupang is $50; 12% higher than analysts' average price target of$44.7and 16.7% lower than analysts' highest price target of $60.\nSource: Author\nIt is expected that the South Korean retail market will exceed$530 billionby 2024. Considering a 35% e-commerce penetration rate and Coupang securing a 20% market share we get a $37.1 billion revenue prediction for Coupang. Taking our P/S ratio of 3.85, and multiplying it by our assumed sales figures, we get a $142.8 billion implied market cap, which is 140% higher than the current market cap and indicates a 34% annual return opportunity.\nConclusion\nThe South Korean e-commerce market is growing quite rapidly. Coupang is the largest e-commerce player in South Korea partly because it managed to build a strong logistics network and delivers items quickly. Our valuation analyses indicate that the stock is undervalued by 50% compared to its peers, thus we see a strong price appreciation opportunity. We anticipate a 34% annual return until 2024, thus we assign a Buy rating to the stock.","news_type":1},"isVote":1,"tweetType":1,"viewCount":861,"commentLimit":10,"likeStatus":false,"favoriteStatus":false,"reportStatus":false,"symbols":[],"verified":2,"subType":0,"readableState":1,"langContent":"CN","currentLanguage":"CN","warmUpFlag":false,"orderFlag":false,"shareable":true,"causeOfNotShareable":"","featuresForAnalytics":[],"commentAndTweetFlag":false,"andRepostAutoSelectedFlag":false,"upFlag":false,"length":15,"xxTargetLangEnum":"ZH_CN"},"commentList":[],"isCommentEnd":true,"isTiger":false,"isWeiXinMini":false,"url":"/m/post/835619573"}
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