Conditions for Coupang, Which Fell Below $30, to Rebound Its Stock Price?

[Asia Economy Reporter Minji Lee] As Coupang continues to experience sluggish stock performance since its IPO, opinions suggest that securing target retail markets through overseas expansion is necessary for a rebound.

On the 28th, Coupang's stock price listed on the New York Stock Exchange in the United States showed a 21.88% decline over the past month, standing at $29.99. Since its IPO in March this year, Coupang's stock price had surpassed the $50 mark but has now fallen below $30.

The high valuation at the time of the IPO is still considered a burden on the stock price. According to Korea Investment & Securities, Coupang's price-to-sales ratio (PSR, stock price divided by sales per share) on the first day of listing was 3.5 times, and the estimated PSR for next year is 2.2 times. Considering that Amazon's average PSR was 2.1 times during 2006-2007 when it began full-scale fulfillment and expanded its Prime membership service in the U.S. market, the valuation burden remains. Myungjoo Kim, a researcher at Korea Investment & Securities, said, “Considering Korea's smaller online market size compared to the U.S. and its high penetration rate, Coupang still faces valuation pressure,” adding, “Stock price recovery is expected to remain sluggish for the time being.” The announcement of below-expectation earnings in mid-month, reflecting costs related to a second-quarter logistics center fire, also contributed to the stock price decline due to disappointment selling.

It is expected that Coupang needs to expand its target retail market through overseas expansion to overcome the sluggish stock price. Expanding the target retail market allows for stable sales growth regardless of the size of Korea's retail market. Korea's online market size is smaller compared to the U.S. and China, and its online market penetration rate is high. Researcher Kim said, “Going forward, Coupang will accelerate overseas expansion focusing on Southeast Asian countries with low online penetration rates and high retail market growth rates,” explaining, “When overseas expansion becomes visible, Coupang's valuation can rise.” Additionally, Coupang is conducting overseas direct purchases in the U.S. and is expanding the target countries for direct purchases to include China and others. In Taiwan and Japan, tests are underway for fast delivery services focused on daily necessities.

Coupang also plans to actively expand its fulfillment services. It is expected that Coupang will start cross-border fulfillment after securing sufficient sellers through the expansion of fulfillment services. Along with strengthening its open market business, Coupang is also expected to actively expand its distribution and service platforms such as Coupang Eats and Coupang Biz (B2B business). Researcher Kim said, “Platform expansion is a factor that increases Coupang's valuation through growth in advertising revenue and others,” analyzing, “Coupang's stock price rebound is likely to occur when platform business expansion and the resulting performance become visible.”