Key Points
Coupang just announced a partnership with Nvidia to build an artificial intelligence factory to improve its e-commerce operation.
The e-commerce and tech business has grown quickly and has significant potential to expand across East Asia.
A data leak scandal recently took a toll on Coupang's stock price, leaving it trading at a cheap valuation.
- 10 stocks we like better than Coupang ›
Not every company in the world is an "AI business," but virtually every company can use artificial intelligence (AI) to improve its operations. Those that do so early should be able to get ahead of the competition -- and it increasingly looks like Coupang (NYSE: CPNG) will be one of them.
The technology company, which does most of its business in East Asia, recently announced a partnership with Nvidia to optimize its e-commerce network. But does that make the stock a buy?
Will AI create the world's first trillionaire? Our team just released a report on the one little-known company, called an "Indispensable Monopoly" providing the critical technology Nvidia and Intel both need. Continue »
Bringing AI to Asian e-commerce
After news of a major data leak last year grew into a complex scandal, its stock price tanked: It's now down by about 44% from the 12-month peak it touched in October. But Coupang appears to be getting back on its feet. Management said revenue growth began to recover in February, suggesting that conditions would return to normal throughout the rest of the year. Now, the company is again becoming aggressive with its growth plans, as seen in its recent partnership with Nvidia to build an AI factory to support its e-commerce logistics network. This will be done through Coupang's internal cloud network, utilizing the latest Nvidia computer chips and software to optimize its systems.
The e-commerce provider is already the most efficient player in its primary market of South Korea, where it delivers items across a wide selection of products to customers within a few hours or by early morning the day after orders are placed. Now, it wants to use AI to better predict customer orders and maximize warehouse efficiency, and it's partnering with Nvidia to do so. This will enable it to offer an even better value proposition to customers while also enhancing profitability, which should be music to shareholders' ears.
Coupang is not just an e-commerce company in South Korea, either. It offers grocery and restaurant delivery, operates the luxury fashion marketplace Farfetch, and has recently begun investing heavily into an expansion into Taiwan. The company has grand ambitions, as its new deal with Nvidia shows.
Image source: Getty Images.
Why Coupang stock is cheap right now
Despite its growth potential, Coupang stock still is trading at what looks like a cheap valuation due to the fallout from its data leak. With that scandal largely in the rear-view mirror, however, investors should be able to focus on the business's actual financial performance, which has been outstanding in recent years.
Revenue is up 151% in the last five years, with positive free cash flow from 2023 through to today. Free cash flow may fluctuate, depending on how aggressively management invests in new initiatives, but the company's stable balance sheet and strong underlying profitability give it the ability to expand without needing to raise funds by selling equity or taking on debt.
Today, Coupang has a market cap of $34 billion, which is right around its trailing 12-month revenue, giving it a price-to-sales ratio (P/S) of just 1. That makes Coupang stock fantastically cheap, particularly for investors looking to hold for a decade.
Should you buy stock in Coupang right now?
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Brett Schafer has positions in Coupang. The Motley Fool has positions in and recommends Nvidia. The Motley Fool recommends Coupang. The Motley Fool has a disclosure policy.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
