On Wednesday, Citi maintained a Buy rating on Coupang Inc (NYSE:CPNG) stock while raising the share price target to $31.00 from the previous $26.00. The adjustment follows Coupang's management statements regarding the anticipated pressure on Product Commerce margins in the near term.
This pressure is attributed to increased investments in technology and infrastructure costs, as well as seasonal costs related to weather. Despite these factors, which have led to a 30 basis point quarter-over-quarter decline in Product Commerce gross margin, Citi's outlook on the company remains positive for the long term.
The firm's positive stance is supported by several key observations. First, Coupang has demonstrated a 20% year-over-year foreign exchange-neutral revenue growth in its Product Commerce segment, coupled with consistent gains in market share. Additionally, the company has managed to control EBITDA loss within its Developing Offerings segment, keeping the run-rate below the annual guidance of a negative $750 million.
Citi's analysis indicates that while there is a risk of profit-taking, especially after Coupang's stock has experienced a significant 66% rally year-to-date, the long-term prospects appear favorable. The firm anticipates that Coupang will generate leverage from its investments in technology and infrastructure as the company scales up. This expectation is based on management's projection of long-term benefits from these strategic investments.
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