On Thursday, CLSA affirmed its Outperform rating and a $31.00 price target on Coupang Inc (NYSE:CPNG) stock, following the company's recent financial performance disclosure. Coupang's adjusted EBITDA for the third quarter of 2024 was reported at $343 million, which is a 5% shortfall compared to the consensus estimates. The e-commerce giant's stock price saw a decline after the market closed on Sunday, November 5, 2024.
The dip in share price is attributed to an unforeseen rise in technology-related expenses, which has adversely impacted the product commerce margin. Despite this setback, CLSA anticipates that Coupang's strong execution capabilities will lead to a normalization of these costs within the next 12 months.
CLSA's analysis suggests that there is significant potential for margin improvement from a consolidation perspective in the medium to long term. The firm remains confident in Coupang's ability to navigate through the current challenges and capitalize on future growth opportunities.
Coupang, known for its dominant presence in the e-commerce sector, has been focusing on expanding its market share and improving its operational efficiencies. The company's strategic initiatives are expected to contribute positively to its financial outlook, as indicated by CLSA's reiterated Outperform rating.
In other recent news, Coupang reported promising Q3 results, with a 27% year-over-year increase in total net revenues to $2.3 billion and a 45% rise in gross profit. The growth was largely attributed to the Product Commerce segment and the WOW membership program's impact on customer engagement. Notably, active customers increased by 11%, with WOW members ordering nine times more than non-members.
Coupang's adjusted EBITDA was $343 million, with a margin of 4.4%. However, free cash flow decreased to $935 million due to nonrecurring working capital benefits and higher capital expenditures. Despite these challenges, the company remains optimistic about margin expansion and leveraging technology investments for growth.
In the midst of these developments, Coupang reported a Q3 profit of $70 million and a diluted earnings per share of $0.04. The company's CEO, Bom Kim, highlighted the near break-even performance of Farfetch (OTC:FTCHQ), indicating a cautious approach to new market expenditure. These recent developments underscore Coupang's commitment to sustaining strong revenue growth and enhancing customer experience.
InvestingPro Insights
Adding to CLSA's optimistic outlook on Coupang Inc (NYSE:CPNG), recent data from InvestingPro provides further context to the company's financial position and market performance. Despite the recent dip in share price, Coupang's year-to-date price total return stands at an impressive 48.24%, significantly outperforming the broader market.
InvestingPro data reveals that Coupang's revenue for the last twelve months as of Q3 2024 reached $28.86 billion, with a robust revenue growth of 24.69%. This aligns with the InvestingPro Tip indicating that analysts anticipate sales growth in the current year, supporting CLSA's positive stance on the company's future prospects.
Moreover, Coupang's price-to-earnings (P/E) ratio of 47.07 may seem high at first glance, but when considering its PEG ratio of 0.3, it suggests the stock might be undervalued relative to its growth potential. This is reinforced by another InvestingPro Tip stating that Coupang is trading at a low P/E ratio relative to near-term earnings growth.
For investors seeking a more comprehensive analysis, InvestingPro offers 11 additional tips on Coupang, providing a deeper understanding of the company's financial health and market position.
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