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CNBC recently released its 2020 Disruptor 50 list, which comprises the top 50 private companies in the world that are positioned to become the next class of multi-billion dollar giants. Landing the No. 2 spot on CNBC’s Disruptor 50 list was Coupang, a $9 billion e-commerce company widely considered the “Amazon of South Korea.” Its placement on the list has many asking the question: Should I invest in Coupang?
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Rumors are swirling that this innovative, hyper-growth e-commerce giant will IPO sometime in 2021. For public investors, that’s exciting, because it gives us the chance to invest in Coupang, which is arguably the most explosive e-commerce company in the world today with huge upside potential in the long run.
Coupang’s valuation currently sits around $9 billion. The company will likely IPO at a higher valuation, maybe around $20 billion or more. Long-term, though, this is a $50+ billion company in the making.
As such, this is an upcoming IPO worth watching. As soon as investors get a chance to invest in Coupang, I’d take advantage of that opportunity.
Here’s a deeper look.
South Korea Is a Great E-Commerce Market
The fundamentals underlying Coupang are very strong.
It all starts with the fact that South Korea is the perfect market for e-commerce. It’s one of the most densely populated countries in the world with an expected peak population in 2024 of 51.35 million. More than 80% of the country’s citizens live in super-dense cities. It’s also one of the most tech-savvy countries in the world, with a 96% internet penetration rate (versus 89% in the U.S.) and the fastest average internet connection in the world.
Not to mention, the smartphone has become ubiquitous across South Korea in a way it hasn’t anywhere else in the world, with 95% of the country’s phone population having a smartphone. In America, that number sits closer to 80%.
It should be no surprise, then, that South Korea’s e-commerce market has grown at a 25%+ compounded annual growth rate since 2015.
Or that the e-commerce penetration rate in South Korea is near 30% (versus approximately 10% in the America).
Or that South Korea’s e-commerce penetration rate could soar to 50%+ over the next few years, paving the path for continued 25%+ annualized e-retail sales growth.
Coupang Is King in South Korean E-Commerce
Coupang is at the epicenter of all this growth.
Yes, South Korea has access to Amazon’s (NASDAQ:AMZN) services. But Coupang is killing Amazon in South Korea at its own game: speed.
Coupang has built out an unparalleled, end-to-end logistics network in South Korea which includes 200+ warehouses spanning 20 million square feet — a footprint so vast that “70% of Koreans live within 10 minutes of a Coupang logistics center.”
The company has leaned into this robust logistics network to dominate last-mile delivery and kill the competition when it comes to delivery times and consumer convenience — something which Amazon is known for in the U.S.
More than 99% of Coupang’s orders are delivered within a day. Soon enough, that time-frame may shrink down to a half-day, with Coupang recently launching a Dawn Delivery program, which promises delivery of items ordered before midnight, by 7 a.m. the next day.
In other words, Coupang is doing in South Korea right now, exactly what Amazon did in the U.S. over the past few years to dominate the U.S. e-retail market.
To that end, Coupang should be able to keep leveraging faster delivery times to sustain its position as the Amazon of South Korea.
Huge Growth Runway
According to management, Coupang’s revenues rose more than 60% year over year to 7.2 trillion won in 2019. E-retail sales in South Korea in 2019 measured 135 trillion won, giving Coupang about 5% market share on a revenue basis.
That share has been rising for several years. It should keep rising going forward, because Coupang is further differentiating itself as the fastest player in this market, at a time when speed is the most important thing to the consumer. Consequently, it’s easy to see Coupang’s market share rising to 20%+ over the next few years.
At the same time, South Korea retail sales should keep growing at a near-3% pace, supported by rising incomes, population growth and urbanization. E-commerce penetration rates will rise from 30% to 50%+ on the back of smartphone ubiquity, increased e-commerce convenience and faster internet speeds.
All together, Coupang projects as a fast share gainer in a South Korean e-commerce market that will easily sustain 10%+ growth.
Assuming so, my modeling suggests that Coupang could, within the next 7 to 10 years, wind up doing $75+ billion in sales. Assuming an Amazon-like margin profile with approximately 5% retail operating margins, I think Coupang has a visible runway to $3+ billion in net profits.
A 20-times multiple on that implies a potential future valuation for Coupang of $60+ billion.
Should You Invest in Coupang?
Coupang is one of the most exciting private companies in the world right now, and arguably the most exciting e-commerce company in the world.
This super exciting company will likely IPO in 2021.
Given that, those looking to invest in Coupang should watch closely for this upcoming IPO. Getting in early on this explosive growth company should pay off handsomely in the long run.
Luke Lango is a Markets Analyst for InvestorPlace. He has been professionally analyzing stocks for several years, previously working at various hedge funds and currently running his own investment fund in San Diego. A Caltech graduate, Luke has consistently been recognized as one of the best stock pickers in the world by various other analysts and platforms, and has developed a reputation for leveraging his technology background to identify growth stocks that deliver outstanding returns. Luke is also the founder of Fantastic, a social discovery company backed by an LA-based internet venture firm. As of this writing, he was long AMZN.
Investing through equity and real estate crowdfunding or asset tokenization requires a high degree of risk tolerance. Despite what individual companies may promise, there’s always the chance of losing a portion, or the entirety, of your investment. These risks include:
1) Greater chance of failure
2) Risk of fraudulent activity
3) Lack of liquidity
4) Economic downturns
5) Dearth of investor education
Read more: Private Investing Risks
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