Coupang Trapped in '30 Dollar' Range... "A Time of Growing Concerns Over Intensified Competition"

Coupang Q3 Revenue $4.64 Billion, Up 48% YoY
Active Customers Down 1.2% QoQ Due to Boycott and Competitor Membership Launch Impact

[Asia Economy Reporter Minji Lee] Despite Coupang achieving its highest-ever sales in the third quarter, a sustained rebound appears elusive. This is due to intensified competition in the e-commerce sector, making a short-term stock price increase unlikely.

According to the financial investment industry on the 20th, Coupang's stock price fell 5.79% over the past month to $27.16. After the third-quarter earnings announcement, it seemed to recover to around $30 but soon continued its downward trend.

Coupang's third-quarter revenue reached $4.64 billion, marking a 48% increase compared to the same period last year. Operating loss widened by about $100 million year-over-year to $315.11 million. The revenue growth rate slowed compared to a year ago due to ongoing infrastructure investments in fulfillment, including the logistics center fire in the second quarter, which prevented logistics operations from reaching an efficient stage, and labor shortages further increased cost burdens.

The number of active customers increased by 20% year-over-year to 16.82 million, and net sales per active customer rose 23% to $276. Seongyeon Seo, a researcher at Shin Young Securities, said, “It is positive that Coupang maintained high growth based on outstanding customer loyalty among domestic e-commerce companies,” but added, “The slight decrease in active customers compared to the previous quarter, down 1.2%, is a concern.” The company explained this as an intentional reduction in customer acquisition activities to maintain the level of customer experience. The market views this as reflecting the impact of Naver and 11st’s paid membership launches, intensified competition, and the domestic boycott movement that reduced customer numbers.

Considering Korea's high online penetration rate and Coupang's high base last year, a slowdown in Coupang's revenue growth rate seems inevitable for the time being. Although the Rocket Fresh segment is recording high growth, given the competitiveness of offline distribution companies in the domestic online food market, it is predicted that Coupang will find it difficult to become a new growth engine in the short term. According to Korea Investment & Securities, the revenue growth rates for next year and 2023 are estimated at 37.2% and 29%, respectively.

Recently, the market has been concerned about intensified competition in the e-commerce business. With the transition to the post-COVID era, there are growing worries that demand for online shopping and food delivery will slow down, as the number of e-commerce operators has significantly increased over the past two years. Traditional retail giants have started focusing their entire capabilities on e-commerce, and companies like SSG.com, Market Kurly, and Oasis are preparing for IPOs next year, likely striving to maximize corporate value through high transaction volume growth.

Researcher Eun Kyung Park of Samsung Securities said, “Regarding concerns about intensified competition, Coupang stated that consumer demand still exceeds Coupang’s order processing capacity, so they are not greatly worried about competition,” adding, “There is no reason to doubt long-term growth potential, but concerns about intensified competition are increasing, and there are no short-term stock price catalysts.”

Next year, Coupang’s price-to-sales ratio (PSR) is 1.8 times, which is lower than Amazon’s average PSR of 2.1 times during 2006-2007 when it fully launched fulfillment and expanded Prime membership in the U.S. Nevertheless, considering the differences in retail market size and online penetration rates between Korea and the U.S., as well as recent intensified competition with Naver and SSG.com, valuation pressure remains significant. Myungjoo Kim, a researcher at Korea Investment & Securities, explained, “Coupang’s stock price rebound will be possible if service revenue materializes through expanding target markets overseas and platform business growth,” adding, “Currently, Coupang provides fast delivery services directly in Japan and Taiwan, and in Korea, it is strengthening Coupang Eats (food delivery), Rocket Play (OTT service), and Jet Delivery (fulfillment) services.”

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