Citi Research analysts lifted their rating on Coupang (CPNG) stock from Neutral to Buy on Sunday after the company’s recent hike in subscription prices for its Rocket Wow service.
Citi also raised its target price on CPNG from $19 to $26.
The company’s shares rose 2% in premarket trading Monday.
Notably, the e-commerce firm lifted the monthly subscription fee for Rocket Wow to W7,890 ($5.7) from the previous W4,990 ($3.6), a move that came significantly earlier than anticipated by Wall Street and Citi, occurring just over two years and four months after the previous increase in December 2021.
“The incremental revenue will be highly profitable, i.e., doesn’t generate costs, and we estimate c.$400m of annual impact on adj. EBITDA,” analysts said in a note.
“We see three positive implications: 1) it will offset the increased losses in new initiatives Taiwan/Eats/FarFetch; 2) the subscription fee has room to further increase, compared to Amazon Prime’s $14.99 per month; and 3) the news indicates management’s will to manage margins in future if the new initiatives need more investment,” they wrote.