Citigroup upgrades Coupang from Neutral to Buy
Coupang Inc (NYSE:CPNG) stock received an upgrade from Citi, moving from Neutral to Buy, alongside a significant increase in the price target to $26.00, up from the previous $19.00. The upgrade was prompted by the company's recent announcement on Wednesday, April 12, 2024, regarding the increase in the subscription fee for its Rocket Wow service.
Coupang raised the monthly fee for Rocket Wow to W7,890 ($5.7) from the prior W4,990 ($3.6). This adjustment occurred sooner than anticipated by both the market and Citi's analyst, coming just over two years after the last fee increase in December 2021. The incremental revenue from this hike is expected to be highly profitable, as it does not incur additional costs, potentially contributing approximately $400 million to the company's annual adjusted EBITDA.
The analyst at Citi highlighted three key positive outcomes from this strategic move. Firstly, the increased revenue from the subscription fee is likely to counterbalance the heightened losses stemming from new ventures in Taiwan, Eats, and FarFetch.
Secondly, there appears to be potential for further increases in the subscription fee, especially when compared to Amazon (NASDAQ:AMZN) Prime's $14.99 monthly charge. Lastly, the recent announcement is seen as an indication of the management's commitment to margin management, especially in scenarios where new initiatives may require additional investment.
This optimistic outlook on Coupang's financial strategies and the potential for increased profitability has led to the improved stock rating and price target, signaling Citi's confidence in the company's future performance.
Coupang's revenue growth has been impressive, with a 23.16% quarterly increase as of Q1 2023 and an 18.46% growth over the last twelve months. This growth trajectory suggests that the company is expanding its market presence effectively. However, it is important to note that while the company is trading at a high Price / Book multiple of 8.08, indicating a potentially premium valuation, analysts predict Coupang will be profitable this year, which could justify the higher valuation to some investors.
The analyst at Citi highlighted three key positive outcomes from this strategic move. Firstly, the increased revenue from the subscription fee is likely to counterbalance the heightened losses stemming from new ventures in Taiwan, Eats, and FarFetch.
Secondly, there appears to be potential for further increases in the subscription fee, especially when compared to Amazon (NASDAQ:AMZN) Prime's $14.99 monthly charge. Lastly, the recent announcement is seen as an indication of the management's commitment to margin management, especially in scenarios where new initiatives may require additional investment.
This optimistic outlook on Coupang's financial strategies and the potential for increased profitability has led to the improved stock rating and price target, signaling Citi's confidence in the company's future performance.
Coupang's revenue growth has been impressive, with a 23.16% quarterly increase as of Q1 2023 and an 18.46% growth over the last twelve months. This growth trajectory suggests that the company is expanding its market presence effectively. However, it is important to note that while the company is trading at a high Price / Book multiple of 8.08, indicating a potentially premium valuation, analysts predict Coupang will be profitable this year, which could justify the higher valuation to some investors.
