AI And Automation Will Expand Horizons In Korea And Taiwan

Key Takeaways

• Technology-led efficiency gains and smart capital allocation are driving operating leverage, margin expansion, and long-term earnings growth opportunities.
  
• Growth in spend per customer and rapid expansion in new geographies and verticals position the company to outpace traditional retail and diversify revenue streams.
  
• Persistent scaling inefficiencies, high expenses, market concentration, and cost pressures in new ventures threaten profitability, margin growth, and earnings stability over the medium term.

Catalysts

Owns and operates retail business through its mobile applications and internet websites in South Korea and internationally.

• Ongoing investments in automation, AI, and logistics technology are already driving major improvements in operational efficiency and gross margins, and management sees significant further upside as these technologies are scaled; over time, this is likely to result in continued margin expansion and growth in earnings.
  
• Rapidly increasing revenue per active customer and robust double-digit spending growth across both new and mature customer cohorts (even as the overall Korean retail market is relatively flat) signal the potential for Coupang to outpace traditional retail, supporting long-term top-line revenue growth.
  
• Coupang's expansion into Taiwan is demonstrating acceleration that mirrors its early growth in Korea, with repeat customers fueling most of the revenue surge and a rapidly broadening selection, indicating strong product-market fit and unlocking an additional high-growth, high-ROI geography for future revenue and earnings.
  
• The scaling of new verticals-such as Fulfillment and Logistics by Coupang (FLC), Coupang Eats, and Coupang Play-is expanding Coupang's total addressable market, diversifying revenue streams, and providing additional pathways for high-margin and recurring revenue growth.
  
• Technology-driven reductions in OG&A expenses and smart capital allocation are expected to drive operating leverage over time, which, combined with large-scale urbanization and rising e-commerce adoption in Asia, sets up substantial long-term growth in both net margins and free cash flow.

Coupang Future Earnings and Revenue Growth

Assumptions

• Analysts are assuming Coupang's revenue will grow by 12.6% annually over the next 3 years.
• Analysts assume that profit margins will increase from 1.1% today to 4.4% in 3 years time.
• Analysts expect earnings to reach $2.0 billion (and earnings per share of $1.09) by about September 2028, up from $365.0 million today. However, there is some disagreement amongst the analysts with the more bearish ones expecting earnings as low as $1.4 billion.
• In order for the above numbers to justify the analysts price target, the company would need to trade at a PE ratio of 41.3x on those 2028 earnings, down from 161.5x today. This future PE is greater than the current PE for the US Multiline Retail industry at 21.6x.
• Analysts expect the number of shares outstanding to grow by 1.35% per year for the next 3 years.
• To value all of this in today's terms, we will use a discount rate of 8.49%, as per the Simply Wall St company report.

Coupang Future Earnings Per Share Growth

Risks

• Coupang's accelerating investments and substantial EBITDA losses in Developing Offerings, especially Taiwan, suggest that scaling inefficiencies persist in new markets; prolonged losses or failure to achieve positive unit economics could depress consolidated earnings and delay profitability for multiple years, weighing on net income and margin expansion.
  
• Elevated operating expenses (OG&A), driven by high and currently rising technology, AI, and infrastructure spend, may not decline as quickly as planned if competitive dynamics or regulatory requirements increase, thus putting sustained pressure on operating margins and reducing near-term profitability.
  
• Coupang's heavy reliance on the South Korea market for its core Product Commerce business, combined with only early-stage international diversification, leaves the company vulnerable to local economic downturns, currency volatility, or regulatory risk in its primary market-potentially affecting revenue stability and long-term earnings consistency.
  
• The company faces risk of margin compression from scaling new logistics-intensive businesses and developing initiatives (such as Eats and new Taiwan service), as long-term labor cost inflation, increased compliance costs, and unpredictability in logistics/fuel costs could erode net margins and require greater ongoing capital investment.
  
• Persistently high tax rates (as seen with the current abnormally elevated effective tax rate due to losses in early-stage markets and restructuring activities) may continue longer than anticipated if international operations remain loss-making, reducing net income available to common shareholders and weighing on reported earnings growth.

Valuation

• The analysts have a consensus price target of $34.181 for Coupang based on their expectations of its future earnings growth, profit margins and other risk factors. However, there is a degree of disagreement amongst analysts, with the most bullish reporting a price target of $39.0, and the most bearish reporting a price target of just $26.2.
• In order for you to agree with the analyst's consensus, you'd need to believe that by 2028, revenues will be $46.0 billion, earnings will come to $2.0 billion, and it would be trading on a PE ratio of 41.3x, assuming you use a discount rate of 8.5%.
• Given the current share price of $32.33, the analyst price target of $34.18 is 5.4% higher. The relatively low difference between the current share price and the analyst consensus price target indicates that they believe on average, the company is fairly priced.
• We always encourage you to reach your own conclusions though. So sense check these analyst numbers against your own assumptions and expectations based on your understanding of the business and what you believe is probable.