I’m new to options and still learning my fundamentals but with some money to spare I want this to be my first big play. It’s a holistic approach I’m taking to DD and if anyone would like to get into the nitty-gritty of the financials, I’d appreciate it. But here’s my framework, a holistic approach, as I’m looking to make this trade within the next few days.
This stock has been disappointing since it’s IPO in March ($35). It’s been tagged as the “Amazon of Korea” except it doesn’t have Amazon’s cloud revenue and it’s branched off into food and grocery delivery. There is some plans for expansion into Japan and south east Asian countries but most of their revenue is generated in Korea.
They have released 2 earnings reports that have underwhelmed the market, mainly because they don’t turn a profit. Q2 was the worse because they brought in over $4.5B in revenue, but operating losses 5x to $515M. A fire in one of their distribution plants had a lot to do with it.
So far so great, huh?
Well here’s some pros arguments.
Internet traffic is up significantly. Q3 traffic was up to 101.3M, a 650% jump from 13.5M last Q3. Korean retail is rebounding from the pandemic and although vaccination rates are slowly catching up to other G20 countries, their daily case counts remain extremely low. Even with the economy opening up, Coupang has become as ubiquitous as Amazon has in Korea. In September, Korea celebrated their Thanksgiving which I believe will lead to a bump up in revenues if it correlates to their traffic.
Q4 guidance should be positive. The winter holidays, and especially the new year, are boom times for Coupang and with increased market share, any guidance they provide should be bullish. The caveat being the supply chain issues and increased input costs felt by companies globally right now.
Political headwinds have eased. During Q3, the Korean government began mimicking China with threats of cracking down on tech companies. Since those remark, the government has backtracked and said that it has no immediate plans to pass new regulations for internet platform companies.
So far, CPNG hasn’t turned a profit and won’t for the foreseeable future. What makes this quarter any different? A quick survey of the internet suggests analysts expect earnings to be about -$0.15 and PTs ranging from $36-$46.
Based on the increase in web traffic, I believe revenue should greatly exceed expectations. Q2 was a disappointed due to the fire and labour issues, and have since been mostly resolved.
The great variable here is how much the push into food and grocery delivery is eating into income. Significant investments, and low margins, to capture market share is the narrative here but is it already priced in to market expectations?
I put my entry into the topic title because these calls are trading at less than $0.50. The shares saw a low of $25 but are now trading above $28. I’m hoping to buy now with the anticipation of a push up above $30 (which it held until this month) and then try to sell in the first week of November (to give me that cushion before earnings - thanks, JB and Conq!).
Apologies if this post seems elementary. I’m very much a rookie but I’m looking at this trade as a sink-or-swim lesson that is not a YOLO at all. Any advice and feedback is much obliged.
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