Why Coupang (CPNG) Stock Is Trading Today By Stock Story
What Happened: E-commerce market Coupang (NYSE:CPNG)’s stock price surged 11.4% in the afternoon session after it announced a 58% increase in WOW membership (a paid membership service) to 7,890 won. The new fees will apply to new members from April 13, 2024, while existing members will start paying higher fees from August. In particular, the number of Coupang’s WOW members will reach 14 million as of the end of 2023. “Assuming no change to the reported 14 million WoW members as of the end of 2023, the increased fees would amount to nearly KRW 490 billion in annual increments,” Morgan Stanley analysts added. In USD terms of revenue that will fall into the EBITDA line, this equates to nearly $360 million in annual EBITDA, which is expected to provide a 10% upside to 2024 adjusted EBITDA (assuming 5 months of contribution this year). “There is room for a 16% upside in 2025.”
Is now the time to buy Coupang? Read the original article on StockStory.
What are the markets telling us? Coupang’s stock price is somewhat volatile, with moves exceeding 5% 11 times over the past year. However, big moves like this are very rare even for Coupang, meaning this news has had a significant impact on the market’s perception of the business.
The biggest move we wrote about last year was about a month ago. Shares rose 12.6% on news that the company reported fourth-quarter earnings with better-than-expected revenue, driven by strong performance from its development offerings ($273 million). Estimated sales ($234 million). Developed offering segments include Taiwan operations, food delivery, video streaming, and fintech solutions. Management noted that the company is seeing particularly good momentum in Taiwan, with customers and revenue more than doubling in the last two quarters alone. We’re also pleased that our 21 million active customers (14 million WOW members) surpassed Wall Street estimates of 20.6 million. Coupang said its sales growth would have been 9.4% higher had it not been for accounting changes to fulfillment and logistics revenue in the second quarter of 2023.
In terms of profitability, Coupang significantly exceeded analysts’ forecasts for EBITDA, EPS, and free cash flow. The company has now recorded positive free cash flow for five consecutive quarters, showing that it is leveraging its fixed cost base. During the quarter, Coupang acquired Farfetch (OTC:), a leading luxury e-commerce platform, by extending a $500 million bridge loan that wiped out stockholders. The deal initially scared investors, but after getting more color this quarter, the panic seems to have dissipated. CEO Bom Kim said he was not actively seeking to acquire the company, but he said the deal was too attractive to pass up, as Coupang was facing the risk of bankruptcy and bought Farfetch for 1 cent. In the aftermath of this transaction, Coupang advanced its plan to achieve break-even in terms of profits without additional investment by eliminating unnecessary costs and firing Farfetch executives. Management hinted that the Farfetch integration would not disrupt the company’s focus on its core business.
Overall, this quarter’s results look fairly positive, and shareholders should be optimistic about the direction of the company.
Coupang rose 35.2% compared to the beginning of the year. Investors who purchased $1,000 worth of Coupang stock in the March 2021 IPO will now be looking at an investment worth $431.68.
