3 Stunning Earnings Insights Show Why Coupang Is a Top E-Commerce Stock – Motley Fool

In third-quarter earnings reported on Nov. 12, South Korea e-commerce juggernaut Coupang (NYSE:CPNG) announced quarterly sales growth of 48% year-over-year (YoY) but saw its shares drop 8% the following day. The sales increase was more than double South Korea’s countrywide e-commerce growth rate of 20% — a figure that has not gone below 20% growth for 12 straight quarters.

Coupang also grew its active customer base by 20% YoY to 16.8 million, marking its 15th straight quarter of 20% growth or more. In addition to this growth, three specific insights from Coupang’s earnings show that it could become one of the premier e-commerce operations in the world — and all at a lowered share price for investors.

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Coupang Eats: #1 app in South Korea

Founder and CEO Bom Kim highlighted that Coupang Eats became the most downloaded app for iOS and second-most for Android (behind a COVID vaccine app) in South Korea during 2021.  This rapid adoption of Coupang’s food delivery service by customers looks like a leading indicator of a significant growth avenue for the e-commerce company moving forward.

Using the power of its stable cash-generating core operations and its $4 billion cash balance, Coupang has been investing heavily in its logistical and delivery networks. With a uniquely dense population, South Korea’s small landmass could give Coupang a major efficiency advantage compared to peers such as Amazon and MercadoLibre.

Combined with advertising and a few additional items, Coupang Eats makes up the company’s other revenue segment. By recording over $500 million in sales during Q3, other revenue grew by 113% YoY and now makes up about 10% of Coupang’s total sales. Management has not provided a specific growth outlook for Eats but believes that it is still in the very early stages of expanding its food delivery network. While Coupang Eats is the primary driver of growth in this rapidly expanding segment, its advertising operations are equally impressive and offer additional growth optionality. 

Advertising revenue skyrocketing

With a growth rate just shy of triple digits, Coupang’s advertising operations are rapidly becoming a significant growth avenue for Coupang as well. Speaking to the importance of this burgeoning business segment, Kim stated: “Our monetization efforts are also gaining traction…We’re still in the early innings and expect advertising to contribute significantly to margins in the future.”

Forging a new growth path in the advertising world, Coupang borrows a page out of Amazon’s playbook, as the latter expects to bring in over $30 billion from advertising during 2021. While this $30 billion in advertising would still be less than 10% of Amazon’s total sales, it is a very high margin unit and adds nicely to the company’s $9 billion in TTM free cash flow.

This highlights that although it is still a tiny portion of Coupang’s overall sales, the advertising market’s traditionally high margins could add to management’s focus on building long-term cash generation potential. Although it’s still somewhat …….

Source: https://www.fool.com/investing/2021/11/17/3-stunning-earnings-insights-show-why-coupang-is-a/