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DD: CPNG – Amazon of Asia

It appears that CPNG is bottoming out. Strong support around $29-30 range. Reached $29 in the morning of 8/30 but bounced back to $30 within an hour. $29-30 range seems to be a good entry point.

Downward pressure on the stock due to a) Q2 earnings result was received poorly. Mainly higher than expected quarterly loss. b) Lockup period ending on Sept 7 & insiders have sold a total of 569,687 shares of company stock worth $18,906,618 in the last three months.

Bull’s Case:

1. Rocket Fresh (Grocery Delivery), and Coupang Eats (Food Delivery), which are two initiatives that accounted for basically most of their adjusted EBITDA loss (initiative still at infancy) has huge growth potential and CPNG with it’s existing infrastructure (70% of the country’s population is within seven miles of one of its fulfillment centers) should be able to drive strong revenue growth without as much cost growth.

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1. TLDR: Existing infrastructure of CPNG = more $, better margin, not as high cost as competitors which means great moat for two new initiatives

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1. Global expansion into other Asian countries (Singapore, Taiwan, Japan) began and company is starting to focus their effort in this global expansion this year. If they can replicate what they did in Korea in these other countries, I believe they should easily be able to gain meaningful market penetration.

Possible Risks:

1. Amazon Global Store launched in Korea via partnership with 11st (Another Korean e-commerce company) on Aug 31st. While I pointed it out here so people know its a possible risk, I’m personally not that worried about this one. G-Market (Another Korean e-commerce company) and Ebay tried it and they didn’t gain any meaningful traction in Korea. Biggest concern among consumers with this partnership seems to be high fees.
2. E-commerce arena is transitioning from regional to global competition. Big variable in terms of how this will play out as regional/country dominant e-commerce company try to gain market penetration in other countries/regions.
3. Korean e-commerce market saturation. Difficult to keep up increase in revenue in home market.

TLDR: Currently they are known as Amazon of Korea, I’m betting they’ll be called Amazon of Asia in a few years. Their core e-commerce services and model should work in other densely populated Asian markets and is IMO superior than even Amazon. They got new initiatives with strong demand and revenue growth at home market they are testing out that is difficult for other competitors to replicate.

Not a financial advise. My positions as of yesterday.

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https://preview.redd.it/cf8gb59yvwk71.png?width=1894&format=png&auto=webp&s=b79b3470ab59f2b38933c810270881f1d36ac844

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15 Comments

  1. Very interesting.

    Price to Sales Ratio looks comparatively good.

    AMZN: 4.07
    EBAY: 4.77

    BABA: 4.12
    CPNG: 3.06

    Price is currently at ~60% of the IPO. Fool says, the profit margin is terribly low so the revenue-based valuation could be misleading. Skimmed a few articles they say the same thing. Also competing with AMZN in damn hard being local doesn’t do shit as AMZN has made a successful entry into Indian markets beating out local competitions. CPNG just isn’t too large enough to beat out local competitions in the few Asian developed countries. And BABA is going to dominate the rest of the Asian countries.

    So, if I were to come up with a random PT it would maybe $18 maybe even $22-$24 considering we are approaching the end of the year.

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