Coupang stock price forms a bullish pattern ahead of earnings

Coupang (CPNG) stock price has moved sideways in the past two years as it continued to underperform other e-commerce companies like Amazon (AMZN) and MercadiLibre. While it has rebounded from the 2022 low of $9 to the current $20, it remains sharply below the all-time high of $68.8. 

Coupang has strong fundamentals

Regional e-commerce companies have been in the spotlight in the past few years as investors look for the next Amazon. MercadoLibre has concured the Latin American market while Jumia has become a leading player in the African continent.

Coupang is a top e-commerce company in South Korea, Taiwan, and other locations like Singapore and Hong Kong. 

The company started like other e-commerce platforms but has expanded its solutions over the years. In addition to its marketplace, the company offers other solutions like Rocket Delivery, Rocket Fresh, Rocket Overseas, Coupang Play, Coupang Eats, and Coupang Pay.

Coupang Play offers streaming solutions while Coupang Eats is a leading food delivery region. Rocket Delivery provides faster delivery solutions while Rocket Fresh provides online grocery solutions. 

Like companies like Amazon and MercadoLibre, Coupang Pay is a solution that simplifies how users make payments. The firm also acquired Farfetch, a troubled e-commerce company in a $500 million deal.

Coupang’s business has been doing well as sales soared. Total revenue rose from $5.7 billion in 2019 to over $21.2 billion in 2023. Most importantly, this growth has happened in a profitable way as the net income soared to over $1.3 billion in 2023. Before that, the company had cumulative losses of over $2.2 billion.

Coupang earnings ahead

The Coupang stock price will be in the spotlight next week as it publishes its next financial results. 

These numbers will come a few months after the company published encouraging financial numbers. The company’s revenue rose by 23% in the last quarter to over $7.1 billion. Excluding Farfetch, its revenue rose by 18% in the first quarter. 

Coupang has continued to add more customers to its platform as the number of users rose from 18.6 million in Q1 to 21.5 million in Q1’23. This trend will likely continue as the company becomes a household name and as it adds more solutions. 

Analysts believe that Coupang’s business will continue doing well in the next few quarters. The average revenue estimate is that it will come in at $7.38 billion, representing a big increase from the $5.3 billion it made in the same period in 2023. Part of this growth will be because of its Farfetch buyout.

For the year, analysts expect that its revenue will be $30.1 billion followed by $34.92 billion in 2026 as the company’s growth continues. 

The most bullish analyst on Coupang stock is Jennifer Han of UBS who expects the company to continue gaining market share in the South Korean market, which is valued at over $124 billion. 

In this case, the analyst sees its EBITDA and merchandise value will continue growing in the next few years. UBS sees the stock rising to $26 while its EBITDA margin will rise to 10% from the current 4%. 

Room to grow profitably

I believe that Coupang has more room to grow its top-line and bottom-line numbers in the coming years. This profitability growth, however, could be impacted by its increased capital expenditure (CAPEX) to boost its fulfillment and logistics infrastructure. 

At the same time, the company seems fairly valued, given its $30 billion market capitalization and over $30 billion in annual revenue. If the company continues boosting its revenues and profits, it could justify this valuation. 

The firm also has more room to grow its margins to match that of other companies in the e-commerce industry. Its gross margins stand at 28% while MercadoLibre has 54% and Jumia has 58% and Amazon has 48%. 

If Coupang’s net profit margin can equal that of MercadoLibre’s 8.20%, it means that its net profit will hit over $2.6 billion, a move that could justify its valuation. 

Coupang stock price analysis

CPNG chart by TradingView

The daily chart shows that the Coupang share price peaked at $23.76 in May this year. These gains happened after the company published strong first-quarter earnings in May this year.

The stock has now erased some of those gains and moved to the psychological point at $20. It has crashed below the 50-day and 100-day Exponential Moving Averages (EMA), meaning that bears are now in control.

Most importantly, the stock has formed a falling wedge chart pattern, which is nearing its confluence level. In most cases, a stock tends to bounce back after the two lines converge. 

Therefore, the CPNG stock price will likely bounce back after publishing its financial results. If this happens, the next point to watch will be the psychological point at $22. On the flip side, a drop below the lower side of the wedge pattern will point to more downside.

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