Bill Gates Just Bought Coupang (CPNG) Stock, Good Investment

The Bill and Melinda Gates Foundation Trust has disclosed a new stake in e-commerce company Coupang (CPNG). Should you buy CPNG stock?

Mohit Oberoi, CFA - Author

May 24 2021, Published 11:31 a.m. ET

Bill Gates and Coupang logo
Source: Getty Images, Coupang Facebook

The Bill and Melinda Gates Foundation Trust has disclosed a new stake in South Korean e-commerce company Coupang (CPNG). However, it has exited the stake in Apple and Twitter. Should you follow the foundation and buy CPNG stock?

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The Bill and Melinda Gates Foundation Trust has bought 5.71 million shares of CPNG. The stake is valued at around $220 million at the current prices. Coupang went public in March and had a strong listing. However, it fell amid the sell-off in growth names. At one point, Coupang was trading below the IPO price of $35.

Coupang stock and the Bill and Melinda Gates Foundation Trust

The Bill and Melinda Gates Foundation Trust is the world’s largest charitable trust with assets of almost $50 billion. The foundation has put its trust in CPNG stock even though it has trimmed stakes in some of the other tech stocks.

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CPNG stock valuation

CPNG stock trades at an NTM (next-12 month) EV-to-EBITDA multiple of 2.99x. The multiples have averaged 4.2x since the company went public and hit a high of 5.53x. The current valuation multiples aren't far away from the all-time low multiples of 2.5x. Since the stock only listed recently, we don’t have enough time-series data to arrive at a conclusion.

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Is CPNG stock undervalued?

CPNG has backward integrated operations and it doesn't use third-party delivery services like other e-commerce companies. Also, we don’t have a real comp set for the company. While Amazon and Alibaba are also e-commerce plays, they have cloud operations as well. Incidentally, Amazon’s cloud operations account for most of its profitability.

coupang inc cpng stock valuation
Source: TIKR

CPNG valuation versus BABA and AMZN

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Meanwhile, CPNG’s valuation multiples are at a discount to both Alibaba and Amazon. While Coupang is growing its top line at a faster pace than these companies, it's currently posting losses. Amazon and Alibaba are both posting profits.

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Coupang stock forecast

According to the estimates compiled by TipRanks, CPNG has an average target price of $47, which is a premium of 23.6 percent over its closing prices on May 21. The stock’s highest and lowest target prices are $39 and $62, respectively.

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Among the six analysts covering the stock, only two have a buy or equivalent rating, while the remaining four analysts have rated CPNG as a hold. Goldman Sachs is the most bullish brokerage on Coupang and has a street-high target price of $62.

Earlier this month, Coupang released its first earnings as a publicly traded company. While its sales were slightly ahead of the expectations, it posted a wider-than-expected loss in the quarter. Citigroup and Mizuho lowered the stock’s target price after the earnings release. Last week, Deutsche Bank upgraded the stock from a hold to a buy.

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CPNG stock is a good buy.

Growth stocks have been out of favor with investors and CPNG stock has also been a casualty of the painful sell-off in growth names. However, Coupang has the market-leading position in South Korea and a strong brand in the country. After the IPO, it has enough cash to fund its growth and bridge the cash burn before the business starts generating positive free cash flows.

I think that Coupang stock is an attractive buy at these prices. It looks like a good way to play the e-commerce industry in South Korea at reasonable valuations.


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