On Thursday, Deutsche Bank upgraded shares of Coupang Inc (NYSE:CPNG) from Hold to Buy, setting a new price target at $21.00, up from the previous $18.50. The upgrade follows Coupang's impressive fourth-quarter performance, which included a significant net income of $1.032 billion, largely attributed to a tax expense clawback.
The company also reported a 20% increase in constant currency revenue, which could have been higher if not for an accounting change in fulfillment revenues.
Coupang's active user base expanded by 16% in the quarter, marking the fourth consecutive quarter of acceleration in this metric. This growth has been driven by various strategic initiatives, including a 10% discount on Eats services, the popularity of Coupang Play as Korea's most downloaded app for two years straight, and increased activity in product commerce and membership.
Each customer cohort grew by more than 15%, and although maintaining this momentum might be challenging, management anticipates a growth rate of around 20% for the current year.
The company's adjusted EBITDA for the quarter rose 40% to $294 million, culminating in an annual total of $1.074 billion. This is despite the Developing Offerings segment reporting a loss of $466 million, which is projected to widen to $650 million in the current year. The consolidation of Farfetch (OTC:FTCHF) is expected to add to the losses for at least 2024. However, the Product Commerce division is on track to generate over $2 billion in EBITDA in 2024, underscoring the core value of the group.
Coupang's net revenue growth, adjusted for foreign exchange and accounting changes, was nearly triple that of the e-commerce market at an effective rate of 29%. This growth occurred in a quarter when Korea's retail sales increased by only 1% year-over-year. Online retail sales in Korea experienced their strongest quarter in the last seven, with an 11.5% increase, led by a 24% surge in cosmetics, an area where Coupang and its competitors have been heavily focused.
The acquisition of Farfetch represents Coupang's aggressive strategy to stimulate growth, which has been more pronounced since the company achieved profitability. The acquisition was considered a strategic fit at a favorable price, contributing to Deutsche Bank's positive outlook and the decision to lift the stock's target price and rating.
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