This company is underfollowed and implementing a sharp business plan.
It’s the new year, and many investors are looking for the best stocks to fuel their portfolio growth in 2025 and beyond. The annual turn of the calendar can inspire investors to reevaluate their holdings, looking for weeds to trim while seeding new positions. 2023 and 2024 were phenomenal years for technology stocks due to the boom in artificial intelligence (AI) tools. However, with the S&P 500 and Nasdaq near record highs, the best opportunities may be drying up in this category.
So where can hypergrowth investors turn for bargains? My answer: Coupang (CPNG -1.17%). The South Korean e-commerce platform remains undervalued and is a perfect growth stock for investors to buy and hold for the long haul. Here’s why.
East Asian e-commerce growth
Coupang is the leading e-commerce platform in South Korea. With a vertically-integrated delivery network similar to Amazon, the company is able to rapidly deliver items to customers, and this has led the company to continually gain share in the country’s retail market. In fact, you can argue it offers a better delivery experience than Amazon. Coupang integrates with its own food-delivery network, delivers groceries within hours, and delivers items by 7 a.m. the next day when ordered before midnight. You can even return items by simply leaving them on your front porch.
All of these perks can be had by paying a subscription of around $5.75 a month — an incredible value and why 22.5 million people are active Coupang customers in a country with a population of 51.8 million. Despite currency headwinds from the strength of the U.S. dollar, Coupang’s revenue has more than doubled since 2021, and it generated $28.9 billion in sales over the past 12 months.
Now, the company is expanding its platform to a new market: Taiwan. It has replicated the playbook used in South Korea with astonishing results so far. Coupang’s developing offerings segment — which includes international e-commerce sales — grew revenue 347% year over year in the third quarter to $975 million. Expanding to Taiwan should help Coupang keep up its impressive growth trajectory for the rest of this decade.
Fast earnings growth with margin expansion
Although Coupang’s revenue growth is impressive, it may not even be the best part about this company. That honor arguably goes to its margin expansion. Coupang is guiding for at least 10% adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) margins over the long term.
In the last few quarters, its profitability has stagnated, but that is due to the heavy investments incurred to launch and grow the Taiwan market. Even so, Coupang generated $124 million in operating income through the first nine months of 2024, a stark improvement from the $1.1 billion operating loss it reported in the same period three years ago.
Why Coupang is a cheap stock today
Today, Coupang sports a market cap of $40.3 billion. Compared to its trailing-12-month adjusted earnings per share of $0.24, the stock looks expensive. However, I think investors should adopt a forward-looking mindset with this stock.
Remember that Coupang is still in the early stages of profitability. Meanwhile, its revenue increased 27% year over year in the third quarter, and top-line growth has been accelerating since early 2023. Analysts expect revenue in 2025 to reach $35.3 billion, giving the stock a forward price-to-sales ratio of 1.1.
That is an attractive entry point for a hypergrowth market leader in e-commerce, making Coupang my top pick for the new year.
John Mackey, former CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. Brett Schafer has positions in Amazon and Coupang. The Motley Fool has positions in and recommends Amazon. The Motley Fool recommends Coupang. The Motley Fool has a disclosure policy.
