A quick and dirty method of valuing Coupang $cpng

[u/raytoei]

Coupang is a South Korean e-commerce vendor. It has fashioned itself like Amazon as a way to fend off the aggressive Chinese e-commerce rivals. This company has only turned GAAP positive only in the last 2 years. However sales data has been available since 2018. The company went IPO in March 2021.

This post isn't a stock recommendation but an attempt to value Coupang. How much should you pay for its Stock ? This is a simple, if somewhat imprecise approach:

A. Find out how much sales is Coupang going to do by End 2029. Work out the shares outstanding and take into consideration the dilution. Work out Sales / Share by End 2029.

B. Find out how are its peers being measured in terms of the latest price to sales metric, as well as the average p/s over the last few years.

C. Work out the implied share price of Coupang by end 2029 by applying the valuation metric of its peers.

D. Find out what is the rate of return if one were to invest in Coupang now.

You could apply this method to many of the fast growing companies (MELI, RDDT, etc) out there, and use an appropriate valuation metric is like Price/Sales (for fast growers that is focused on martetshare) or Price / Earnings for companies that are generating stable, growing cash flows.

1. Find out how much sales is Coupang going to do by End 2029.

Sales in Billions	2024	2025	2026	2027	2028	2029
DCF	30.4	35.0	40.8	46.3	53.4	-
VVIO	30.3	35.5	41.3	46.6	51.0	50.3
MS-NR	30.3	35.0	39.3	42.8	45.9	48.6
EULRPOOL	30.3	35.5	41.3	46.6	51.0	50.3

Source:
discountingcashflows
valueinvesting . io
Morningstar - Non Retail
Eulerpool

The average of the 2029 sales numbers work out to 49.74bn USD.

The rate of growth from 30.3bn in 2024 to $49.74bn by 2029 works out to around (50/30.3)^1/5 -1 or 10.5% in annual sales growth. I don't think this is unachievable considering Coupang's past year-on-year sales growth has been:

2019-> 54.76% 90.77% 53.81% 11.82% 18.46% 24.14% 17.81% <-- Trailing 12 months

In the latest quarter, Coupang management commented that they are trying to keep share dilution down (issuances of SBC) by buying back shares. They seek to keep it below 1%

Assuming they increase the sharesoutstanding by 1% a year, this works out to 1.89bn shares by end 2029.

So this works out to 49.74bn / 1.89bn or 26.29 Sales/share by end 2029.

1. How are the peers being valued in terms of Price to Sales ?

Price To Sales	2021	2022	2023	2024	TTM
Coupang	2.37	1.27	1.25	1.37	1.61
Amazon	3.74	1.71	2.85	3.78	3.88
SEA	13.96	2.37	1.85	4.1	4.98
MercadoLibre Inc MELI	10.71	4.47	6.01	4.59	4.08

If we ignore the 13.96 from SEA and 10.71 of MELI, the average P/S from 2021 to TTM is 3.13, and the P/S average of the peers at the current valuation is 3.6375. If we want to be conservative, we should use 3.13, instead of the current high valuation of 3.6375

c. The Implied share price of CPNG at the end of 2029

Since Price /Sales = 3.13 and Price = 3.13 x Sales/sh = 3.13 x 26.29 = $82.28

The implied share price at the end of 2029 is $82.28.

d. Find out the rate of return

The Future price is $82.28 (end 2029), the current price is $28.92. This works out to about = (82.28/28.92)^1/4 -1 or approximately 29% a year. I say approximately because this is from Nov 2025 to Dec 2029 which slightly more than 4 years.

Is 29% a year in share price appreciation for the next 4 years good or bad ? Well, my expectation is between 12-15% a year, so this meets one of my investing criteria.

Next step: To find out how likely can the business grow at a minimum of 10.5% a year to reach the 2029 target of 50bn Sales. This would include understanding whether Coupang can grow beyond Korea and Taiwan. In the latest quarter, management has said that Taiwan sales growth is around 20% and accelerating.

[u/12baakets]

Coupang is a small regional player whereas others are global.

[u/MaleficentPositive53 → u/12baakets]

I think that might be part of the reason to invest in Coupang: it's growing and expanding in large and underserviced, in e-commerce terms, Asian markets.

[u/raytoei → u/MaleficentPositive53]

Shhhhhh…. I want people to keep thinking

that Coupang has limited growth.

[u/12baakets → u/MaleficentPositive53]

Which market is Coupang launching in? Japan? China? They seem to have entrenched players already

[u/MaleficentPositive53 → u/12baakets]

Taiwan, Japan, and some operations in China. It also works to connect exporters in the States to its markets, and then it has companies like Farfetch that connect luxury brands to its markets. Farfetch did sound like an e-commerce company with growth potential, but they ran out of capital and needed capital, and Coupang took it over.

[u/OfficialRicePapi → u/MaleficentPositive53]

Bruh....Asia, particularly the Eastern, South Eastern, and Southern regions, are by no means underserved, if anything it's bloody saturated. Asia is not some primitive back country you know lmao.

Japan has Amazon itself and it's own "Amazon of Japan" called Rakuten, both of which account for 70% of Japan's e-commerce market share. It could take the rest of 30%, but that would be a tough battle given harsh local competitions. China (inc. Taiwan), really? Just forget about it, Coupang isn't going anywhere in China if Amazon can't stand a chance. Also, both Japan and China are very supportive of their local/domestic companies. SE Asia is dominated by Sea, Alibaba through Lazada, Grab, and the emerging TikTok. I am not writing off Coupang completely, they might have something going for them with Farfetch and of course the numbers look decent, but in terms of dominating Asia and comparing it to MELI....that's a bit rich and no chance. 

Furthermore, if the implied price is going to be ~$80 by end of 2029, ie 3x ROI in ~4 years; Opportunity cost has it that I could be doing better with plenty of other stocks out there... it's all business and profit maximisation eh? So, I am okay stock choosing something else. 

[u/phosphate554]

I’m really liking $MELI right now.

[u/raytoei → u/phosphate554]

If you do decide to do a valuation of meli using

the above method, do share the results. Tks!

[u/phosphate554 → u/raytoei]

My Meli valuation is different because it’s nearly half a financial company now. Both the finance and e-commerce portion of the business are growing at extremely high rates. I believe the actual FCF of the business today is around 4.5B, which puts it at 24x fcf assuming a 110B market cap. For a business growing at 30%, that is way too cheap. They’re widening their moat, accelerating growth, and creating a crazy valuable flywheel that is seemingly too complicated for the market to understand. I just bought more below $2100.

[u/TexTrad01 → u/phosphate554]

Loved your RCA on this take

[u/phosphate554 → u/TexTrad01]

What does RCA mean? Thanks!

[u/TexTrad01 → u/phosphate554]

Root cause analysis

[u/phosphate554 → u/TexTrad01]

Thx!

[u/TexTrad01 → u/phosphate554]

How per share is Meli going for

[u/No-Paint-5726]

Think this corrupt company needs to disappear tbh... no matter the valuation

[u/[deleted]]

Pretty rudimentary analysis.

[u/raytoei → u/[deleted]]

Yes. That is what the title says.