Is Coupang, Inc. (CPNG) the Top Stock to Buy?

In the fast-paced world of e-commerce, Coupang, Inc. (CPNG) has emerged as a formidable player, capturing the attention of investors and analysts alike. With its strategic investments in technology, logistics, and customer experience, Coupang has positioned itself as a potential top stock to buy. But is it really the best bet for investors? Let's dive deep into the numbers and the narrative to find out.

The Numbers Don't Lie

First, let's look at the financial metrics that matter. In 2024, Coupang's revenue soared to $30.27 billion, a 24.14% increase from the previous year. This growth is impressive, but how does it stack up against industry giants like Amazon? Amazon's revenue for the same period was $637.96 billion, showing a much larger scale but a lower growth rate of 9.44% year-over-year. This suggests that while Coupang is growing rapidly, it still has a long way to go to match the scale of giants like Amazon.



However, the story isn't all sunshine and roses. Coupang's earnings took a nosedive in 2024, dropping to $154.00 million, a decrease of -88.68% from the previous year. This drop in earnings could be a concern, but it's important to consider the context of significant investments in growth and expansion. Amazon's earnings for the same period were significantly higher, indicating that while Coupang is growing, it is still in the process of achieving profitability at the scale of its competitors.

Market Share and Margins

Coupang's market share within the Internet, E-commerce, Online Shops Industry was 1.87%, and within the Retail Sector, it was 2.06%. This shows that Coupang is a significant player in the e-commerce market but still has a relatively small market share compared to giants like Amazon, which has a market share of 39.42% in the Internet, E-commerce, Online Shops Industry and 43.41% in the Retail Sector.



When it comes to financial ratios, Coupang's gross margin was 29.18% in 2024, which is higher than its previous years but still lower than Amazon's gross margin of 40.04%. Coupang's operating margin was 1.86%, which is lower than Amazon's operating margin of 4.31%. Coupang's profit margin was 0.51%, significantly lower than Amazon's profit margin of 4.65%.

The Strategic Edge

Coupang's strategic investments in technology, logistics, and customer experience align well with Durable Capital Partners' investment philosophy, which focuses on long-term growth, innovation, and sustainable competitive advantages. Coupang has invested heavily in an end-to-end integrated fulfillment and logistics network, which supports its core retail and marketplace offerings. This investment in technology and logistics is aimed at maintaining a competitive edge in the fast-paced e-commerce industry. For example, Coupang's Rocket Delivery service promises next-day delivery, which is a significant draw for customers and a testament to its technological infrastructure.

The Risks and Opportunities

However, there are potential risks to consider. Despite strong sales, Coupang's recent financial performance shows a net loss attributable to stockholders. This indicates underlying financial vulnerabilities that may stem from aggressive expansion efforts, such as the Farfetch acquisition, and the costs associated with maintaining its extensive logistics network. For instance, in 2024, Coupang reported earnings of $154.00 million, a decrease of -88.68% compared to the previous year. This financial instability could pose a risk to long-term investors.

Coupang has also faced challenges with KFTC regulations and associated financial implications. These regulatory hurdles could impact the company's ability to execute its strategic investments and maintain its competitive edge.

On the other hand, Coupang's investments in technology and logistics position it well for market expansion. The company's strong market presence and customer base, as evidenced by its robust growth in net retail sales, provide a solid foundation for further growth. For example, Coupang's net retail sales increased from $5,315 million in the third quarter of 2023 to $6,140 million in the same period of 2024.

The Verdict

In conclusion, Coupang's strategic investments in technology, logistics, and customer experience align well with Durable Capital Partners' investment philosophy, focusing on long-term growth, innovation, and customer satisfaction. However, potential risks such as financial vulnerabilities and regulatory challenges must be carefully managed to fully realize the opportunities presented by these investments. While Coupang shows strong revenue growth and positive free cash flow, its earnings and profit margins are lower compared to industry benchmarks and competitors like Amazon. However, the rapid growth in revenue and the positive analyst outlook suggest that Coupang has significant potential for future growth and profitability.