Coupang (CPNG) Misses On Q3 Revs Due To Labor Shortages; Pullback Is Creating A Nice Entry Point
4:18 pm Friday, November 12th, 2021
Coupang (NYSE:CPNG) shopped until it dropped in Q3, missing revenue expectations for the second straight quarter as labor shortages strained shipping times. Often referred to as the “Amazon (AMZN) of South Korea,” CPNG has seen its stock stuck in a downward trend YTD similar to other e-commerce companies that are looking to become the “Amazon” of their respective regions.
For example, Jumia Technologies (JMIA) is looking to capitalize on the rise of e-commerce across Africa, while Ozon (OZON) is trying to do the same in Russia. Both stocks have struggled to garner momentum this year, despite a spike in e-commerce spending after the pandemic ignited increased online shopping.
One of the main hurdles facing JMIA and OZON is the massive size of the regions they are trying to operate in, which can cause major logistical issues as both try to scale appropriately. However, South Korea benefits from much higher population density than many African countries and Russia, so CPNG doesn’t have the same massive logistical obstacle in its path.
So why is its stock similarly struggling? We think it primarily has to do with consistently missing revenue estimates. That is not to say CPNG is not showing strong growth. In Q3, CPNG grew revs 48.1% yr/yr and 70% on a two-year stack to $4.64 bln. CPNG is also a long-term play, so short-term misses are to be expected. However, given the rise in e-commerce spending brought about by the pandemic, investors may be growing impatient with the stock.
CPNG has also dealt with labor shortages throughout the year due to rising COVID cases and government restrictions. For example, in July, the South Korean government imposed stricter restrictions than at any point during the pandemic, which led to a reduction in hiring and current employees showing up to work.
This labor issue forced CPNG to focus on its current customers and only accept orders on products that it knew it could deliver within a day, which helped contribute to its revenue miss. However, this focus did lead to CPNG being able to average delivery times under 12 hours for its Rocket Wow members (similar to Amazon Prime members) and delivered about 99% of orders within a day.
Bottom line, although CPNG may continue to face uncertainty in the short term, we think patient investors could see significant upside over the longer term as the stock is currently trading about 10% below its IPO price of $30. Also, much of CPNG’s issues stem from more transitory factors, which could turn into a tailwind going forward.
