Over the past six months, Coupang’s shares (currently trading at $16.13) have posted a disappointing 7.4% loss, well below the S&P 500’s 13.9% gain. This may have investors wondering how to approach the situation.
Is now the time to buy Coupang, or should you be careful about including it in your portfolio? Get the full breakdown from our expert analysts, it’s free.
Why Is Coupang Not Exciting?
Even though the stock has become cheaper, we’re cautious about Coupang. Here are three reasons we avoid CPNG, plus one stock we’d rather own.
1. Change in Active Customers Points to Soft Demand
As an online retailer, Coupang generates revenue growth by expanding its number of users and the average order size in dollars.
Over the last two years, Coupang’s active customers, a key performance metric for the company, increased by 7.2% annually to 24.7 million in the latest quarter. This growth rate is slightly below average for a consumer internet business and is largely a function of its already massive scale and penetrated market. If Coupang wants to reach the next level, it likely needs to innovate with new products. 
2. Low Gross Margin Reveals Weak Structural Profitability
For online retail (separate from online marketplaces) businesses like Coupang, gross profit tells us how much money the company gets to keep after covering the base cost of its products and services, which typically include the cost of acquiring the products sold, shipping and fulfillment, customer service, and digital infrastructure.
Coupang’s unit economics are far below other consumer internet companies because it must carry inventories as an online retailer. This means it has relatively higher capital intensity than a pure software business like Meta or Airbnb and signals it operates in a competitive market. As you can see below, it averaged a 28.9% gross margin over the last two years. Said differently, Coupang had to pay a chunky $71.09 to its service providers for every $100 in revenue.
3. EPS Trending Down
Analyzing the long-term change in earnings per share (EPS) shows whether a company’s incremental sales were profitable — for example, revenue could be inflated through excessive spending on advertising and promotions.
Sadly for Coupang, its EPS declined by 41.4% annually over the last three years while its revenue grew by 17.1%. This tells us the company became less profitable on a per-share basis as it expanded.
Final Judgment
Coupang isn’t a terrible business, but it isn’t one of our picks. Following the recent decline, the stock trades at 19.2× forward EV/EBITDA (or $16.13 per share). Beauty is in the eye of the beholder, but our analysis shows the upside isn’t great compared to the potential downside. We’re fairly confident there are better stocks to buy right now. Let us point you toward a fast-growing restaurant franchise with an A+ ranch dressing sauce.
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