"Coupang to Experience Temporary Earnings Slump Due to Increased Investments"

Stock Price Drops About 43% Since Listing

"Performance Improvement Difficult Due to Increased Investment,
Market Share Growth Trend Is Positive"

[Image source=Yonhap News]

[Asia Economy Reporter Minji Lee] Coupang is expected to report sluggish earnings for the time being due to continuous investments. However, it is anticipated to expand its market dominance in the e-commerce sector through business expansion and increased investments in various areas.

According to the financial investment industry on the 10th, Coupang's stock price fell about 6.27% from $29.98 to $28.10 over the past month. Since its listing, it has dropped approximately 42.94%. The decline is analyzed to be due to concerns over earnings and increased selling pressure, leading to a continuous downward trend in the stock price.

Currently, the domestic e-commerce market experienced rapid growth due to the spread of COVID-19, but with rising vaccination rates and normalization of lifestyles, short-term growth rates are expected to slow down. Amid this, market share is expected to continue rising due to investments in Rocket Fresh and Coupang Eats. As the digital consumer MZ generation emerges as the main purchasing group for groceries, the penetration rate of food and dining services in the e-commerce market is predicted to keep increasing.

Researcher Sangjun Park from Kiwoom Securities explained, “Coupang will continue its aggressive market share growth strategy by leveraging lower free shipping costs and fast delivery services compared to competitors, as well as Coupang Eats’ single-order delivery service.”

Besides shopping commerce, Coupang is expanding its business into various areas. After successfully establishing itself in the food delivery service market through Coupang Eats last year, it is actively pursuing the OTT business this year via Coupang Play. Recently, it is also preparing a quick commerce service business through ItsChingu.

Researcher Sunghyun Nam from Hanwha Investment & Securities said, “There is a high possibility of synergy with shopping commerce through fulfillment services and delivery services via third-party logistics, differentiating Coupang’s market expansion among online commerce companies. Although it is difficult to definitively predict success, considering high consumer loyalty through various shopping commerce platforms and the successful establishment of Coupang Eats, it is highly likely that Coupang will secure meaningful market dominance in various fields.”

However, short-term earnings improvement is expected to be difficult. This is due to cost burdens from additional logistics center construction and completion, increased expenses from entering various business areas, and costs associated with expanding market share. Previously, Coupang recorded approximately 5 trillion KRW in sales and an operating loss of 577.4 billion KRW in the second quarter. While sales grew 57% compared to last year, the deficit widened. Although the fire at the Deokpyeong logistics center had an impact, the operating loss also increased partly due to concentrated investments in Coupang Eats and Coupang Play.

Researcher Sangjun Park stated, “With the rapid expansion of logistics infrastructure investment around the IPO in March this year and the slowing growth rate of the domestic e-commerce market, fixed costs will increase in the short term. However, considering the upward trend in market share, an EBITDA-based turnaround to profitability can be expected in 2023.”

This content was produced with the assistance of AI translation services.