Coupang's AI Cloud Expansion and Automation Efforts Make it a Strong Investment Opportunity

Coupang, a South Korean technology company, is expanding into cloud computing with its rebranded Coupang Intelligent Cloud service. It is also investing in AI tools to improve its e-commerce fulfillment network, with a focus on automation and cost savings. With its long growth runway, the stock looks cheap for investors looking to buy today.

South Korea's Coupang, a leading e-commerce company, is making significant strides in diversifying its business portfolio by expanding into cloud computing and artificial intelligence (AI). The company recently rebranded its cloud computing division as Coupang Intelligent Cloud, marking a strategic move to capitalize on the growing demand for AI-driven services. This expansion, coupled with its ongoing investment in AI tools to enhance its e-commerce fulfillment network, positions Coupang as a forward-thinking technology company with substantial growth potential.

Coupang's foray into cloud computing is particularly noteworthy as it follows the successful model of Amazon Web Services (AWS), which has become a cornerstone of Amazon's business. By selling its AI-focused cloud computing services to third parties, Coupang aims to replicate the success of AWS, a business line that has significantly contributed to Amazon's growth and profitability.

The timing of Coupang's cloud computing expansion is advantageous. The global market for AI data centers is experiencing rapid growth, and the South Korean government has proposed a substantial investment to boost homegrown data center infrastructure. Coupang is well-positioned to benefit from this initiative, as it is one of the few companies actively vying for these lucrative contracts.

Beyond cloud computing, Coupang is also investing heavily in AI to improve its e-commerce fulfillment network. The company's innovative approach to automation and cost savings has enabled it to offer free delivery within a single day, a feat made possible by its highly efficient network of drivers, robots, and automation systems. This focus on automation not only enhances customer satisfaction but also drives long-term cost savings for the company.

Coupang's robust growth trajectory is evident in its financial performance. The company's revenue has grown by a cumulative 170% since going public in 2021, and its gross profit margins have been improving. Management's projections indicate that Coupang's e-commerce business could achieve at least 10% profit margins, with potential growth in advertising and cloud computing driving margins even higher.

Despite its impressive growth, Coupang's stock is currently undervalued. With a market capitalization of $53 billion, the company's stock price lags behind its $32 billion in trailing revenue. Over the long term, Coupang's potential for growth is substantial, with the company projecting revenue of $50 billion within a few years and $100 billion within a decade. If Coupang achieves a 10% profit margin on $100 billion in revenue, it would translate to annual earnings power of $10 billion, resulting in a price-to-earnings ratio (P/E) of just five.

For investors seeking long-term growth opportunities, Coupang's stock presents an attractive proposition. Its strategic expansion into cloud computing and AI, coupled with its strong e-commerce foundation, positions the company for significant growth. While the stock may experience short-term volatility, its long-term prospects are promising for investors willing to hold onto their positions.