Struggling luxury retailer Farfetch has been purchased by Coupang, the South Korean eCommerce giant. The deal gives Coupang greater access to the personal luxury goods space, while offering Farfetch $… After a roller coaster year of surprises, including a November decision to withhold its earnings results for the third quarter of 2023 and the cancellation of its planned conference call, Farfetch has… John Ballard has no position in any of the stocks mentioned.
The company’s robust growth, evidenced by a continual rise in active customers to an impressive 21 million, challenges skeptics who argue market saturation. Therefore, I believe that approximately $2.3 billion of EBITDA could be on the cards for Coupang’s core segment in 2024. This would leave the business priced at 14x forward EBITDA. The ongoing investments in developing offerings, particularly in Taiwan, contribute to incremental losses in adjusted EBITDA (we’ll soon discuss further).
CPNG Stock Valuation – 14x EBITDA For Core Business
The company is generating $150 million in interest and investment income rather than having to worry about interest payments. Upgrade to MarketBeat All Access to add more stocks to your watchlist. Over the previous 90 days, Coupang’s stock had 2 downgrades and 1 upgrade by analysts.
Here we can see YCharts tracking revenue before the company IPO, with revenue now skyrocketing to a new record $20+ billion USD in annual sales. The price, on the other hand, has dropped from nearly $50 a share down to a near-record low of $15/share. Again, elements I look for where price action is non-reactive to https://www.currency-trading.org/ growth. In its annual report issued earlier this month, Coupang disclosed that it had about 1.58 billion Class A shares outstanding, and roughly 175 million Class B shares outstanding. The only difference between the share classes is voting rights, so in all, Coupang has roughly 1.75 billion shares outstanding.
The Motley Fool has positions in and recommends Coupang. Many people believe that South Korea is a soon-to-be over-saturated market, with a population of only 51 million citizens. CEO Bom Kim still maintains the company is laser-focused on their own domestic market, which he believes has a TAM of over $500 Billion itself. Using even a 6% discount rate, which seems will be quite a bit higher than the risk-free rate 5 years from now, would give us a future value of $34 a share.
Coupang’s Q4 was up against the easiest comparable quarter of the prior year. Therefore, it was clearly going to deliver a strong performance, with solid revenue growth rates. Slowing growth in 2022 had sent the stock down almost 80% from its previous peak, so investor expectations have been low. Investors have also had to process the rationale for Coupang’s recent acquisition of online luxury goods marketplace Farfetch, which has struggled to generate profitable growth. The largest item that stands out on the cash flow statement is the larger than normal increase in accounts payable and a positive starting net income of $429 million.
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Coupang has reported strong financial results for the third quarter of 2023. The company’s net revenues reached $6.2 billion, with a year-over-year growth of 21% on a reported basis and 18% on an FX-n… As a long-term “buy and hold” investor, I am less prone to the whims of earnings reports on a quarter-to-quarter basis. Nonetheless, we have 5 downward revisions and only one upward by analysts rolling into this report. Let’s also keep in mind that this quarter will encompass Christmas, and South Korea, being a largely Christian country, does celebrate the holiday with a day off and extra gift buying.
- Coupang was the most downloaded app in the second qua…
- As a long-term “buy and hold” investor, I am less prone to the whims of earnings reports on a quarter-to-quarter basis.
- Eventually, this company looks destined to operate worldwide.
And investors will go from risk-seeking to risk-averse without a moment’s notice. As you can see from this graphic above, subsequent to my previous analysis, the stock continued to sell off toward its all-time lows. Very few investors would have had the stomachs to continue to hold on to this stock. Farfetch Holdings, the online luxury marketplace and technology platform, reached the precipice of insolvency in the third quarter. A last-minute $500 million bridge loan from the $21 billion South Ko…
2024 full-year revenue is estimated at $27.23 Billion, which would be a $40.85 Billion market cap based on forward numbers. With 1.787 Billion shares outstanding, that would give us a fair price range of $20.5-$22.85 a share. Rumors emerged early in the day that Coupang would be selling millions of additional shares, according to a report by The Fly. An easy way to think about this could be Meta’s (META) investments into the metaverse. The core business is growing very profitably, but its investments into other nascent segment is viewed by Wall Street as little more than a distraction. And if something were to come out of these investments, it would be a free option on the stock.
During the quarter, Coupang acquired Farfetch, the leading e-commerce platform for luxury goods, by extending it a $500 million bridge loan that wiped out its equity holders. The deal initially scared investors, but the panic seems to have died down after receiving more color this quarter. CEO Bom Kim https://www.topforexnews.org/ stated he wasn’t actively seeking to acquire a company, but the deal was too attractive to pass up as Coupang bought Farfetch for pennies on the dollar because it faced bankruptcy risk. Management implied that the Farfetch integration is not detracting from the company’s focus on its core business.
Coupang Announces Results for Fourth Quarter 2023
O’Shaughnessy used to run O’Shaughnessy Asset Management, LLC, an asset management firm that Franklin Templeton later acquired. Through his writing and research, he reviewed which fundamental premise was most indicative of value and support levels for a stock. He found that price-to-sales was even more effective in predicting value than price-to-earnings or other ratios.”
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. 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? Anyone who follows my work will know that I put a lot of focus on the customer adoption curve. And for Coupang to still be increasing its active customers to 21 million, goes to the heart of the bear case that long ago argued that Coupang had already saturated its market penetration in South Korea. Coupang is up 15.1% since the beginning of the year, and at $18.10 per share it is trading close to its 52-week high of $19.31 from August 2023.
4 analysts have issued 1-year price targets for Coupang’s stock. Their CPNG share price targets range from $17.00 to $25.00. On average, they anticipate the company’s stock price to reach $21.07 in the next twelve months. This suggests a possible upside of 13.9% from the stock’s current price. View analysts price targets for CPNG or view top-rated stocks among Wall Street analysts.
In the near term, Coupang has demonstrated an impressive y/y increase in active customers each quarter of the year, with a solid 16% y/y increase in active customers in Q4. On the profitability side, Coupang blew past analysts’ EBITDA, EPS, and free cash flow projections. The company has now posted five quarters of positive free cash flow in a row, https://www.forexbox.info/ showing it’s gaining leverage on its fixed cost base. With only a small share of the retail markets in Korea and Taiwan, the stock could be a good value at these lower share prices compared to where it traded just a few years ago. Management credited investments it made years ago, such as fulfillment and logistics, for driving strong results.
According to 6 analysts, the average rating for CPNG stock is “Buy.” The 12-month stock price forecast is $21.5, which is an increase of 17.04% from the latest price. The company seems to be mimicking all the positive portions of industry leaders in e-commerce, including food delivery services and streaming. The company has quickly become one of the largest employers in South Korea, a country with a few well-established behemoths. This is also a founder-run company by a Billionaire, for which studies would tell you that this is a positive omen.