Not even Warren Buffett can claim a perfect track record. Over the course of the past century, almost no investors have emerged unscathed. Whether legends like Jesse Livermore or titans like Carl Icahn, all have suffered tremendous losses at different times.
But a rare few have had scintillating performances, growing in every market condition, through booms and busts. Stan Druckenmiller is among that elite group and he’s bet 17.9% of his portfolio on one Korean stock, Coupang. Why?
Revenues have been impressive in a tough economic climate. The e-commerce company that has grown its market share in every quarter since its IPO is posting rising year over year sales.
- 2021 Q1: $4.20B (up 74.2% yoy)
- 2021 Q2: $4.47B (up 71.3% yoy)
- 2021 Q3: $4.64B (up 48.1% yoy)
- 2021 Q4: $5.07B (up 33.5% yoy)
- 2022 Q1: $5.11B (up 21.6% yoy)
- 2022 Q2: $5.03B (up 12.5% yoy)
- 2022 Q3: $5.10B (up 9.8% yoy)
Even better than Coupang’s market share growth is its opportunity to significantly grow it further from the current 15% level.
How high could Coupang’s share grow? Let’s look at Amazon’s e-commerce share growth as an example:
- 2016: 34%
- 2017: 37%
- 2018: 41%
- 2019: 45%
- 2020: 47%
- 2021: 50%
Should Coupang grow its market share in South Korea to rival Amazon’s in the United States, the company’s revenues could rise to over $15B.
Operating Income Turns Positive
Add the above tailwinds to positive operating income this past quarter and the upside for this ecommerce leader is enormous in the coming years.
The turnaround in profitability has been nothing short of spectacular. In Q2 2021, operating income was in the red to the tune of over half a billion dollars. Fast forward to this most recent quarter, and the number is closer to $80 million in the black.
Further highlights include growing margins, which are trending higher. Gross margin was 17% in the first quarter of 2021 but its most recent quarter showed gross margin eclipsing 24%, a very impressive figure for an ecommerce company so early in its life.
And the opportunity is even more attractive when comparing Coupang’s gross margins to those of Amazon, which came in at 44% in the last quarter. The upside to Coupang’s profitability is significant if it can double its gross margin over time to rival that of Amazon.
Like Amazon, Coupang has the opportunity to expand from a lower margin ecommerce business to more profitable business lines over time. And that’s not just a pipe dream, it’s already happening.
Management has placed bets on areas from financial technology to fast-food delivery services. It will take some luck to stumble on a business as good as AWS is for Amazon, but it’s clear management is prioritizing other growth levers beyond its current ecommerce focus.
While few stocks are a slam dunk in this inflationary environment, Coupang offers a long-term growth potential for patient investors willing to bet on growing profitability, gross margins, cash flows, and diversified business lines. It’s clear Stanley Druckenmiller has high conviction that this thesis will play out. At the very least, it’s worth keeping a close eye on this Asian stock.