On Thursday, Barclays (LON:BARC) expressed continued confidence in Coupang Inc (NYSE:CPNG) shares, maintaining an Overweight rating and a $32.00 price target for the company's stock. The firm's analysis followed Coupang's third-quarter earnings report, which showcased better-than-expected revenue growth of 25% year-over-year in constant currency, excluding Farfetch (OTC:FTCHQ) (FF). Additionally, the group's EBITDA margins were favorable at 4.4%.
Despite the positive revenue growth and group EBITDA, Coupang's product commerce EBITDA margins saw a decrease quarter-over-quarter by 142 basis points to 6.8%, falling short of expectations. The management attributed this decline primarily to increased technology spending during the quarter.
However, they emphasized that this spending is not a structural change and may vary, reassuring their commitment to improving margins over time. They also projected higher EBITDA margins for the fiscal year 2024 compared to 2023.
Barclays analysts support Coupang's strategy of significant investments in anticipation of strong future growth. They believe that the company's margins could see a recovery as early as the next quarter and advise investors to look beyond short-term fluctuations in financial results, particularly in margins.
In terms of new business ventures, Coupang's developing offerings reported much narrower losses in the third quarter than anticipated, with Farfetch almost breaking even, surpassing the company's own timeline by a quarter. Barclays concludes that Coupang's fundamentals remain robust, reiterating their positive stance on the company's investment potential.
In other recent news, Coupang Inc. reported strong Q3 results, with a 27% year-over-year increase in total net revenues to $2.3 billion and a 45% rise in gross profit. Active customers increased by 11%, with WOW members ordering nine times more than non-members.
However, the company's adjusted EBITDA was reported at $343 million, a 5% shortfall compared to consensus estimates. This was attributed to an unforeseen rise in technology-related expenses, impacting the product commerce margin.
Despite these challenges, CLSA remains positive about Coupang's future, maintaining its Outperform rating on the stock. The firm anticipates a normalization of these costs within the next 12 months and sees significant potential for margin improvement in the medium to long term.
These recent developments underscore Coupang's commitment to sustaining strong revenue growth and enhancing customer experience. The company reported a Q3 profit of $70 million and a diluted earnings per share of $0.04, with CEO Bom Kim highlighting the near break-even performance of Farfetch, indicating a cautious approach to new market expenditure.
InvestingPro Insights
To complement Barclays' positive outlook on Coupang Inc (NYSE:CPNG), recent data from InvestingPro offers additional context for investors. Coupang's revenue growth remains strong, with the company reporting a 24.69% increase in the last twelve months as of Q3 2024, aligning with Barclays' observations. This growth is further supported by an InvestingPro Tip indicating that analysts anticipate continued sales growth in the current year.
Despite the temporary dip in product commerce EBITDA margins noted in the article, Coupang's overall financial health appears solid. An InvestingPro Tip highlights that the company holds more cash than debt on its balance sheet, which could provide flexibility for the technology investments mentioned by management.
The market seems to be pricing in Coupang's growth potential, as reflected in its valuation metrics. The company's P/E ratio stands at 47.07, which may appear high at first glance. However, another InvestingPro Tip suggests that Coupang is trading at a low P/E ratio relative to its near-term earnings growth, indicating potential value for investors who share Barclays' long-term optimism.
For readers interested in a deeper dive into Coupang's financials and prospects, InvestingPro offers 11 additional tips, providing a more comprehensive analysis of the company's investment potential.
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