Therefore, it was clearly going to deliver a strong performance, with solid revenue growth rates. I will further speculate that Coupang could turn Farfetch into a luxury powerhouse in the Asian region, including China, a crucial market for the long-term future of the entire luxury industry. Historically, millions of tourists from Asia flooded major European shopping districts every year. Europe is still the go-to place for luxury goods shopping, not only for Asians but also for tourists from the US and the Middle East. The primary reason is that most luxury brands originate from Europe, and prices there are usually lower than in the rest of the world.
- Maybe I’m missing something in the picture, maybe I should be able to draw some conclusions there that I’m just simply overlooking.
- By eliminating all styrofoam, Coupang uses Fresh bags to deliver groceries, whereby customers can leave empty bags outside their doors to be picked up by Coupang drivers on the next delivery.
- But what if I told you that Coupang’s core profitability is actually clipping much higher than this, but this profitability is being masked by its “Other Projects”, named Developing Offerings?
- They actually implement innovative technologies in almost everything.
- An easy way to think about this could be Meta’s (META) investments into the metaverse.
I have been on Industry Focus very skeptical [laughs] of food delivery, restaurant delivery. So to me that’s not the greatest business to be in, but for them because, again, this is a compressed company, a country with really dense cities, it is a sustainable business model in the long term. It’s just getting it right, so that there is a humane balance for the freelancers who are taking these deliveries for them to be able to earn a decent living without risking their lives.
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Coupang understands the challenges of all online shopping platforms, whether long shipping times or limited selection for faster delivery. In response, the company has developed a business model focused on creating an integrated technology and infrastructure system to enhance the customer experience. Before I dig into it more, I must mention that Coupang allocated around $400 million to Developing Offerings in 2023, including some capital to build out the logistics in Taiwan to replicate its domestic success in other Southeast Asian markets. I would rather have the company focus on its domestic market and expand its offerings there.
Although Coupang is making great efforts to continue growing as a business, there hasn’t been much expansion in other countries, but this might be just a matter of time. Coupang used to rely on a group of subcontractors to be able to ship and deliver their orders, but in January this year, the company also launched Coupang Logistics, thus bringing its wide fulfillment network in-house. Coupang has become one of the largest ecommerce companies in the world. It has grown exponentially in the last couple years without any sign of stopping soon. Coupang Play is a streaming service that offers movies, news, original series, sports and event live-streamings. “What you really need to know is whether or not in the business environment of Korea and e-commerce can they be able to generate a huge, profitable return on capital,” Daniel Yoo, head of global asset allocation at Yuanta Securities, said on CNBC early Thursday.
Coupang Eats became more popular during the Covid-19 lockdown and was once the most downloaded application in Korea. This means buying into cheap companies at the moment when their narrative is changing and the business is on a path toward becoming significantly more profitable over the next year. In conclusion, as I assess Coupang’s recent Q results, I’m drawn towards its low valuation of 14x forward EBITDA for its core business. So, even though the business is optically extremely profitable, it won’t ever trade at a US-like multiple.
The trucks and the operation belong to Coupang, a start-up founded by a Harvard Business School dropout that has shaken up shopping in South Korea, an industry long dominated by huge, button-down conglomerates. In a country where people are obsessed with “ppalli ppalli,” or getting things done quickly, Coupang has become a household name by offering “next-day” and even “same-day” and “dawn” delivery of groceries and millions of other items at no extra charge. As a result, the e-commerce https://www.currency-trading.org/ market in this country has grown tremendously over the past decade, reaching almost $200 billion in 2023. It is set to double by 2030, expanding at a CAGR of approximately 11%. I expect Coupang will continue to grow its market share despite significant competition and slower customer growth. Net other revenue also includes consideration from online restaurant ordering and delivery services performed by Coupang and advertising services provided on its apps or websites.
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Jonah is looking for companies with 100%+ upside over the next 2-3 years. I’m also curious to see what they do with Farfetch and how much information they are willing to share in the earnings press release and conference call. I believe Farfetch has a market cap of $25+ billion at the peak a few years ago, and then last month, CPNG basically bought them for $500 million, plus some debt and a bag of donuts.
Immediately, what you’ll notice is the 50 basis point expansion in underlying profitability. But what if I told you that Coupang’s core profitability is actually clipping much higher than this, but this profitability is being masked by its “Other Projects”, named Developing Offerings? Nonetheless, I remain bullish on its prospects and believe this https://www.forex-world.net/ stock is a rewarding investment, with undeniable prospects. As investors have continued to embrace a risk-off sentiment, anything that is not the magnificent 7 mega caps appears not to be rewarded with any positive traction. Jonah Lupton is a former Wall Street wealth advisor and portfolio manager turned entrepreneur and full-time investor/trader.
Part of those benefits are actually stock options as part of this IPO process. So, based on what I read and what I’m seeing, I feel like they are trying their best to deal with the culture issue that is coming out about the working requirements https://www.forexbox.info/ that it takes to have a business this large, becoming the largest delivery provider in Korea. But in my opinion, it’s somewhat mitigated by the steps that they’ve taken to decrease hours and ensure better working conditions.
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In light of the recent acquisition of the luxury fashion platform Farfetch by a Korean e-commerce giant, Coupang is emerging as a key player on the global stage. Here we get to know the Korean business company, as its potential begins to grow more on an international scale. For the moment, Coupang is South Korea’s biggest e-commerce retailer, its status further cemented by people stuck at home during the pandemic and those in the country who crave faster delivery.
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However, I went back and forth with my position in Coupang for almost a year, selling entirely when the stock could not hold key levels and buying again at the pullbacks. During this period, the stock price has literally stayed flat at around the $15-$16 range, with some buying opportunities in March 2023 and a 52-week high in August 2023 when the price reached almost $20 per share. In 2019, Coupang launched its Rocket WOW membership program for a flat monthly fee. It began by offering unlimited free shipping for millions of products with no minimum spend. Today, millions of members also enjoy Dawn Delivery and Same-Day Delivery shipping options, free unlimited returns for 30 days, and Rocket Fresh groceries. Korea is the fourth largest economy in Asia and the twelfth largest globally as of 2022, with a gross domestic product (“GDP”) of $1.8 trillion and GDP per capita of $32,730.
Why you should know about Coupang
There’s no need to try to attempt to justify it otherwise, this is a simple fact. And investors will go from risk-seeking to risk-averse without a moment’s notice. This shows that its nascent businesses, termed Developing Offerings, actually increased their losses by a significant amount. And this is detracting from Coupang’s overall profitability.
I may trim this position before earnings because I’m slightly worried about margin compression from the Farfetch acquisition, which could spark a sell-off post-earnings (I will cover this more below). The business model of Coupang categorizes its revenue as (1) net retail sales and (2) net other revenue. While there are attractive tailwinds for commerce in Korea, it is also one of the world’s most competitive and fastest-moving retail markets. To be successful, existing and new entrants must appreciate Korea’s demanding consumer preferences. For online offerings, this extends to building and tailoring an e-commerce solution surpassing innovation in other mature retail markets, such as the United States.