Coupang: The Amazon of South Korea (Long Term Play/Possible Earnings Play)

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Preface
I recently stumbled upon Coupang watching one of Rareliquid’s stockpick videos and was immediately entranced (if you don’t know him, watch him ASAP; at 7:40 he speaks about Coupang https://youtu.be/nwc1ZE3rcvs). Their product is ecommerce and they do a damn good job at it. A reason why they’re so huge in South Korea is because of how tech crazy and compact Korea is. Many don’t have the luxury to walk to the grocery store and rely on ecommerce to thrive (I explain their product in detail further down). Looking from a technical analysis, many here will be immediately turned off. Yet, I believe it’s at a low that it’ll never go down to again in it’s history. A reason it dropped so much from it’s hot IPO is because of how the company runs financially. They take a page right out of the Amazon textbook and use blitzscaling to grow at an EXTREMELY fast past (great article on wtf it is: Blitzscaling). Because of their grow at all cost mindset, they’ve missed their past earnings and the stock has fallen because of it (this is the overall consensus I’ve gathered but there’s most likely more). All in all, I’m a 18 year old college student with just enough money for booze, Taco Bell and of course investing. So take what I’ve written with a grain of salt and don’t sue me.

Why No One Does It Like Coupang (not even Amazon)/Business Description

How did I ever live without Coupang?’ is Coupang’s bold mission statement. Their mission statement perfectly represents the daring and ambitious this growing South Korean ecommerce business has. The main product that Coupang sells is their signature ecommerce delivery: Rocket Delivery. Unlike Amazon’s Prime shipping, Rocket Delivery ensures that the customer if their order is placed before midnight then they will receive their item the next morning. With Coupang’s Rocket Direct Service, customers can also buy goods from foreign marketplaces and receive them in 3 days. It’s because of this exceptional service that Coupang’s user base is almost half the size of South Korea’s population. Moreover, Rocket Delivery also provides an extraordinary return system. For instance, a customer can simply just place the item they wish to return on their front door and Coupang will pick it up for you. Like Amazon Prime, Coupang also has a paid subscription service, Coupang Wow, that provides subscribers with free shipping along with benefits in the plethora of Coupang services.

Outside of their premier delivery service, Coupang also has a multitude of other business ventures. Their newest being Rocket Fresh, an overnight grocery delivery service (similar to Instacart) where customers can receive their food by 7 A.M. They also have their own UberEats spinoff with Coupang Eats. Similar to UberEats and Doordash, customers order their food through Coupang Eats and have it picked up by a ‘Coupangfriend’(Coupang’s delivery staff). Perhaps the most unique of Coupang’s services is Coupang Flex. With Coupang Flex, Coupang pays anyone 18 years or older to pick up Coupang packages from logistical centers and deliver them themselves (Uber except with delivery services). Coupang also has a video streaming service called Coupang Play that’s available to Coupang Wow members.

As of right now the services listed above stand as Coupang’s primary services. Even with these services, Coupang still has plans for growth. The biggest being Coupang’s expansion into the international market. Coupang recently has already begun to test international waters by piloting their Rocket Delivery service to Tokyo, Singapore, and Taiwan. Coupang has also talked of venturing into the Fintech sector and merchant services.

A Diversified, America Experienced Leadership

Another area where Coupang shines is their diverse leadership. Bon Kim, Coupang’s Harvard dropout founder and CEO, lived in the United States for a majority of his life until transitioning to South Korea and beginning Coupang. Coupang’s CFO and CTO, Gaurav Annand and Thunan Pham, worked for major U.S companies like FoodCart and Uber before joining Coupang. Through this experience, Coupang has been able to innovate and dominate the South Korean ecommerce market.

Competition/Financial Analysis
Rareliquid does a way better job of explaining this better than I can do (he’s an ex JP Morgan IB Analyst) so watch his video. Basically, their biggest challenger to expanding into Asia is obviously SEA. Yet, Ben (rareliquid) provides a convincing argument for why he’s bullish.

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My Position/Conclusion
Shares that I’ll hold for a while. Will transition my shares into next year leap calls once I learn more about how to do so. If there’s people out there who trade leap calls and are bullish on Coupang please reach out to me.

I firmly believe in Coupang and love their product and leadership. They are still in their early stages and I don’t see this company regressing based on the info above. Their earnings are coming up November 12th and I do not see this company falling any further given it’s fundamentals. I will be sure to be watching closely and just wanted to write this DD so CPNG could get some traction by more smarter people than me. Peace

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Since I like your passion and I happen to know some about this, I’ll be the bear with a grain of salt for you.
Before we get in, I discuss the general future of the company, and I’m probably one of the lowest crust of this community; the burnt bottom. I’ve been wrong, I could be wrong, and I will be wrong.

Finance

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They are indeed growing in revenue, but they never have been profitable, and their debt has been growing as well. I acknowledge that they are blitzscaling. I get that some loss in the start-up is expected. After all, Amazon wasn’t profitable for a long time until it became the big boy we know. So with a generous amount of copium, one could say that extreme expansion will pay off. But what if I tell you that their expansions are likely to fail?

Competitors
Coupang is burning all of its money on expanding. They do delivery, Coupang Eats, OTT, and more. One thing to note here is that they are diving into red oceans. There are established rulers on each field:
Delivery

  • 네이버(Naver: biggest Korean e-commerce corp),

  • 이마트(Emart: bootlegged version of Walmart but techier)

Food delivery:

  • 마켓컬리(Market Kurly: The first unicorn popular among the younger generation)

  • 배달의민족(Race of delivery: The first and biggest pie taker)

  • 요기요(Yogiyo: 2nd biggest business in the field)

OTT:

  • Netflix (Netflix)

  • Wavve (local OTT service presenting Korean shows)

Every new step they take, the more competitors they make. Coupang is spreading its power across several fields to compete with companies solely dedicated to their field. Germany had two battlefronts at once, and we all know how it ended.

Korean Regulation
This is a murky one since I’m not entirely sure which law they follow. Korean part of the Coupang is 100% owned by Coupang inc, which was founded in Delaware, US. Its principal executive office is in Seoul, South Korea. It does business mainly in South Korea, but CEO Bom Kim is a racist with American citizenship who hates Koreans, and most of the executives are Americans. Weird? I know.
Coupang could be in trouble depending on its nationality. The current Korean party loves anti-corp regulations. They have issued more than triple regulations than the previous party, and if they win the upcoming election, who knows what regulations they’ll come up with. Coupang is stuck in a bad spot. If they are a Korean company, they are subject to the possible regulations. If they aren’t, then they become liars pretending to be patriots with all the media activities they’ve done.

Problem with Korean market: why Coupang MUST expand overseas
The Korean market population is steeply decreasing. The Korean e-commerce market is full of competitors and Coupang can’t sustain itself in the Korean market. One could take some copium and claim that Coupang could somehow fully take over the Korean e-commerce market. Even then, it is not at all promising.

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The fertility rate has been steadily decreasing, now at a total of 0.84 (2020), and is expected to fall even beyond. Even if Coupang takes over Korea, the pie itself is shrinking at a rapid pace. This is one of the main differences between Coupang and Amazon; the US market is incomparably bigger than the Korean market. Eventually, globalization is not an option for Coupang, it’s their only lifeboat out of the sinking ship.

Problem with Globalization
Their delivery business model requires relatively high degree of infrastructure and public safety, preventing them from expanding into some places. Currently, Coupang is trying to expand onto Japan and China, and I’m skeptical.

  • Japan has an ongoing history of politically attacking Korea, sometimes leading to regulations on Korean companies. Furthermore, they have a local e-commerce beast called Rakuten and a Korean company, 네이버(Naver) that already made it into Japan.

  • China has wonderful leadership.

  • If they want to expand to the US, they’ll have to face Jeffrey. No amount of copium will let you see Amazon losing to Coupang.

Is CEO trustworthy?
Let’s ignore the fact that he is a racist who hates Koreans but loves Korean money and has killed quite a lot of his laborers cause who cares about ethics if they make money? cough cough Blizzard, Disney, NBA, CCP. Bom Kim is basically in charge of decision-making, so let’s look at him as a leader of a company and see if he’s reliable. I have a clip of his deleted interview with CNBC on his IPO found in Korean communities.

Do you find him reliable? You be the judge. For me, he makes Elon look sexy.

Final note
Please, think by yourself and don’t let a random internet reply decide what you do with your precious money. I’m not a good investor nor a lawyer, more of a delirious doomsayer. I could be a monkey randomly typing who happens to make sense by chance. Coupang could prove me wrong and thrive more than I expect. I don’t know how sp will go in the near future/earning. It could be a good short-term play, and I could be stopping you from being a financial mentor of Warren Buffet in the near future after earning big with Coupang. However, I’m certain that in the longer timeframe, the company won’t make it. If a stock has been sinking and the captain is fishy, that ain’t yo captain. It may be Devy Johnes taking you to the depths of hell.

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Great DD! There was another coupang post that i contributed to with just my experience with the company. You made a lot of great points that has me more bearish for the future. For the Korean market Shinsegae is acquiring Ebay Korea which will be a big hit for coupang. China and Japan is probably going to fail. The only market expansion plan i see working would be SEA (excluding Singapore). But creating a logistics network in places like that would be costly and time consuming. As time goes by, local start ups plus foreign companies entering the market would put a fault to coupangs efforts.

On the bullish side they are also ramping up in Korea I believe by adding more distribution center, trying to increase revenue and customers through sales, and exclusive events for coupang play such as korean SNL and Coldplay live concert.

just watched the video, dam the ending was so weird how he had to repeat that. Seems like begging but then until recently i didnt actually know a whole lot about korea despite being korean so at the same time its like trying to be informative. 투자헤주세요 ㅋ. Avoiding the profitability question is also bad, reminds me of when i was a young boy in bulgaria. Literally the dogginess just reminds me of Vlad Tenev (RobinHood).

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Thanks for the DD. I watched the rareliquid video and the interview with the CEO - I’m a little concerned with their expansion into all these different areas. I’m pretty sure Amazon was focused on it’s marketplace becoming profitable before it started expanding into its different ventures, whereas Coupang appears to be searching for that one business they can be profitable in. When rareliquid said that “we don’t really know what [Coupang] is yet”, that made me less inclined to want to invest. Granted it could work out and they have a blowout quarter, but at a cursory glance, I don’t get how they are focusing on how to be profitable in one of the markets they are in, and their CEO offers no guidance as to when profitability might occur, and was actively avoiding the question.

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Have you looked into Sea Limited? I noticed that Cramer picked Sea Limited over Coupang, and I am curious if you know what would lead him to that decision?

Also, have you ever looked at Jumia? It’s like the Amazon of Africa.

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I learned my lesson with the Amazon of Africa…Jumia. Should have named it Jumaji

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I dunno the product or Korean market.

More zoom 1d chart makes me want more confirmation it’s in an uptrend, it could easily break down again from here.

Feature-wise what you describe is not super impressive vs. competitors, it’s basically table stakes grocery and ecomm delivery. I’m not super bullish on streaming changing their core profitability.

Without some major product or revenue stream really setting them apart in an obvious way, or incredibly profitable growth, would def need to wait on confirmation it’s breaking out to make an entry.

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Wow this is a really interesting bear DD. I couldn’t find that much bear cases on the internet about Coupang but this is really making me reevaluate my position. Great work and thanks for providing a bear case for everyone on this.

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I agree with this also. I think this earnings is going to be make or break it for the company as I stated earlier. If their earnings flop I’ll most likely exit. However, if they show signs of earning profit I think Wall Street might tag on. Thanks for the reply

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Yes I have a little bit into SEA limited and the conceseus seems to be that it’s properly valued and there isn’t that much growth into it (might be wrong). Are you bullish on SEA?

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I am not. I just saw the comparison from Cramer and was curious why he opted to go with SEA.