Coupang’s (NYSE:CPNG) quicker-than-expected turnaround on profitability metrics is prompting a more bullish review from Citi.
The Korean eCommerce company handily beat analyst estimates on Wednesday evening, noting record gross profit and margins. Based upon that strength, management noted that its EBITDA profitability schedule has been sped up by multiple quarters.
This ahead-of-schedule EBITDA turnaround was applauded by the market, with shares rocketing higher on the earnings release and maintaining double-digit gains into Thursday’s pre-market session. Analysts publishing research on Thursday soon added their voices to the fray of positive commentary, with Citi analyst John Yu offering an early upgrade.
He raised his outlook on the stock from “Neutral” to “Buy” on the basis that a hyperfocus on profitability and margin improvement is precisely what is called for in the current market climate.
“We positively view the profit-centered strategy, especially under the current rising interest rates environment,” Yu wrote. “With higher visibility in near-term profit, we believe it is time to consider [Coupang’s] (CPNG) potential for achieving long-term guidance of 7~10% adj. EBITDA margin.”
He added that changes to the business in terms of monthly subscription fee increases and shifts in Coupang Eats commissions signal the company remains firmly focused on its bottom line. Likewise, prudent capital allocation improvements and the expectation of eased labor constraints, operational efficiency and scaling merchant services were cited as key tailwinds.
To be sure, Yu was cautious with his price target as he adjusted estimates to match beaten-down global e-commerce peers and a less-forgiving market. He added that the stock remains “high risk” due to its still-nascent status as a publicly-traded, the potential for slower growth post-pandemic, and increasing competition.
He assigned a $15 price target to shares, cutting his target from a prior $29. The reining in of his price target is the fifth-such trimming pursued by Yu in the past year.
Read more on the highlights from the quarterly report.
Coupang’s (NYSE:CPNG) quicker-than-expected turnaround on profitability metrics is prompting a more bullish review from Citi.
The Korean eCommerce company handily beat analyst estimates on Wednesday evening, noting record gross profit and margins. Based upon that strength, management noted that its EBITDA profitability schedule has been sped up by multiple quarters.
This ahead-of-schedule EBITDA turnaround was applauded by the market, with shares rocketing higher on the earnings release and maintaining double-digit gains into Thursday’s pre-market session. Analysts publishing research on Thursday soon added their voices to the fray of positive commentary, with Citi analyst John Yu offering an early upgrade.
He raised his outlook on the stock from “Neutral” to “Buy” on the basis that a hyperfocus on profitability and margin improvement is precisely what is called for in the current market climate.
“We positively view the profit-centered strategy, especially under the current rising interest rates environment,” Yu wrote. “With higher visibility in near-term profit, we believe it is time to consider [Coupang’s] (CPNG) potential for achieving long-term guidance of 7~10% adj. EBITDA margin.”
He added that changes to the business in terms of monthly subscription fee increases and shifts in Coupang Eats commissions signal the company remains firmly focused on its bottom line. Likewise, prudent capital allocation improvements and the expectation of eased labor constraints, operational efficiency and scaling merchant services were cited as key tailwinds.
To be sure, Yu was cautious with his price target as he adjusted estimates to match beaten-down global e-commerce peers and a less-forgiving market. He added that the stock remains “high risk” due to its still-nascent status as a publicly-traded, the potential for slower growth post-pandemic, and increasing competition.
He assigned a $15 price target to shares, cutting his target from a prior $29. The reining in of his price target is the fifth-such trimming pursued by Yu in the past year.
Read more on the highlights from the quarterly report.