Coupang

Coupang guided for third-quarter constant-currency revenue growth to slow to 8%-9% year on year and adjusted EBITDA margin contraction of 300-400 basis points, while expecting product commerce-adjusted EBITDA margins to return to pre-data-breach levels by mid-2027.

Why it matters: Spending by new, returned, and retained customers grew 16% year over year in the second quarter versus product commerce's 8% constant-currency growth, suggesting customers who have yet to return remain the main drag on revenue growth. We attribute the softer third-quarter outlook to a slower pace of customer returns, Chuseok timing, and weather-related factors. As the impact of the data breach fades from the comparison base, we expect revenue growth to accelerate and adjusted EBITDA margin to return to pre-incident levels over 2027. To reflect slower-than-expected revenue and margin recovery, we cut our 2026 and 2027 adjusted EBITDA estimates by 29% and 4%, respectively. The magnitude of the 2026 revision is amplified by a small EBITDA base. We leave our midcycle adjusted EBITDA estimate largely intact.

The bottom line: We maintain our fair value estimate of USD 25.80 per ADS for narrow-moat Coupang. The shares look undervalued. We think the market is extrapolating the current growth and margin weakness too far into the future. We remain confident in Coupang's earnings recovery for two reasons. WOW membership has returned to a record high, roughly three quarters after the data breach. We do not think customers are finding better value elsewhere, as returning customers have resumed and exceeded their prior spending levels.

Coming up: Following the July fire at the fulfillment center, Coupang is assessing the damage and intends to pursue insurance claims. Related losses and recoveries will begin to be recognized in the third quarter. We have not incorporated fire-related losses into our model and do not expect a material impact on our valuation.

Coupang repurchased 23 million Class A shares for USD 459 million during the quarter, equivalent to roughly 1.3% of diluted shares outstanding, at prices below our fair value estimate. About USD 907 million remained under the repurchase authorization as of June 30, 2026. We view the buybacks as accretive and as evidence that management also views the stock as undervalued.

Our fair value estimate is $25.80 per ADS, implying 27 times 2027 enterprise value/adjusted EBITDA. Our WACC is 7.5%.

We assume Coupang’s total revenue grows at a 6% CAGR in the next decade, after factoring in the impact from the data breach in November 2025. In the long run, cross-selling among the product commerce and development offerings segments will drive total customer spending, creating a flywheel effect. For instance, customers who use Eats and Rocket Fresh services should purchase more general merchandise on Coupang’s platform. Thanks to the food delivery Eats discount and unlimited free delivery for Wow subscribers, members who use Eats in the developing offerings segment tend to stay on Coupang’s platform, which should lead to higher spending in the product commerce segment.

We project product commerce revenue to grow at a 6% CAGR in the next 10 years, driven by a growing number of Wow members and an increase in both purchase frequency and average spending per customer. Increased adoption of small and midsize enterprises in Fulfillment and Logistics by Coupang should help to increase the merchant base, product categories (especially in longtail categories like fashion and beauty), and assortment, increasing its proportion of customers’ spending.

Developing offerings revenue should rise at an 9% CAGR during the next 10 years, based on our estimates. In our view, Eats is a tool to increase both Wow membership and cross-selling to the product commerce segment, instead of being a key revenue and profit driver on a stand-alone basis. We also assume its Taiwanese and Farfetch businesses will continue to grow in the coming decade.

We conservatively assume all fines and class-action settlements associated with the data breach will be incurred in 2026, and that higher compliance costs will be incurred in all forecast years. We estimate adjusted EBITDA will grow at a 18% CAGR in the coming decade, benefiting from economies of scale, increasing bargaining costs against suppliers, efficiency gains from automation and artificial intelligence, mix shift of margin-accretive businesses such as advertising and third-party commission, and the gradually improving profitability of its developing offerings. In particular, higher-margin third-party marketplace gross merchandise volume should grow faster than first-party businesses, in our view. Advertising and commissions are both higher-margin businesses versus first-party business. We also anticipate the unit economics of Eats, which is already positive, to continue to trend up as the number of Wow members increases. However, we forecast it will take the Taiwan business nine years to break even (by 2029), versus eight years for the Korean e-commerce business, which is longer than management’s estimate that the Taiwan business will break even faster than the Korean business. Overall, we project adjusted EBITDA margin to increase to 13% by 2035 from 4% in 2025, in line with management’s guidance of "well past 10%."

We think Coupang, South Korea’s largest retailer by retail value, has a narrow moat derived mainly from its network effect and secondarily from intangible assets. While returns on invested capital may see some temporary hiccups following the late 2025 data breach, we expect excess returns over WACC to persist over the next decade.

Coupang’s leadership position in South Korea’s retail market gives rise to a powerful network effect. As of March 2026, Coupang had 35.03 million monthly active users, rebounding from 33.64 million in February after the data breach, according to IGAWorks MobileIndex data reported by Aju Press. This firmly positions Coupang ahead of domestic rivals such as 11st (8.15 million), Naver Plus Store (7.77 million), and Gmarket (6.81 million). Coupang’s strong traffic and user base attract more merchants, expanding categories and assortments, which in turn drive greater consumer engagement—a classic flywheel effect.

We think Coupang’s intangible assets stem from its unrivaled fast, high-quality delivery services, which are difficult to replicate given their asset-heavy nature. These delivery services enabled Coupang to enhance its network effect and become the largest e-commerce player in Korea, increasing its retail value share to 28% in 2025 from 17.5% in 2020 (Euromonitor). Coupang has replicated wide-moat Amazon’s e-commerce playbook by ensuring fast delivery through self-built fulfillment centers and logistics infrastructure in South Korea. It further strengthens its network effect via Fulfillment and Logistics by Coupang (FLC), comparable to Fulfillment by Amazon, and its Wow membership program, similar to Amazon Prime. FLC adoption continues to grow, particularly among small and midsize enterprises, enabling more merchants to leverage Coupang’s logistics network. This has fueled growth in longtail categories such as fashion and beauty, which we think can in turn attract and retain more customers. By contrast, Shinsegae’s and Naver’s logistics infrastructures cannot yet support comparable service levels, contributing to Coupang’s faster market share growth. Wow members enjoy rapid free delivery without minimum purchase requirements, free returns, livestreaming subscriptions, and exclusive discounts, which increase customer stickiness and further reinforce the network effect.

As early as 2018, CEO Bom Kim noted that 99.6% of orders were delivered within 24 hours. Rocket Delivery includes dawn, same-day, and next-day delivery, supported by over 100 fulfillment centers strategically located so that 70% of South Korea’s population lives within 11 kilometers of a logistics hub. Academic research (Yoon Joo Park, Seoul National University of Science and Technology, 2023) found that customers value dawn delivery more than daytime delivery, reinforcing continued use. South Korea’s long working hours and limited shopping time further increase reliance on dawn delivery. These services underpin Rocket Fresh, South Korea’s largest online grocer, and drive traffic across categories.

We estimate that replicating Coupang’s delivery infrastructure would require more than KRW 9.5 trillion ($6.94 billion) in investment, making it unlikely that local competitors will match its scale in the near to medium term.

Although rivals can improve delivery speed through third-party logistics partnerships—such as Naver with CJ Logistics—these providers can serve multiple platforms, limiting differentiation. Naver launched same-day delivery with Argo in April 2024, but this does not surpass Coupang’s speed advantage.

In our view, business model innovation by new competitors could reduce Coupang’s network effects. Cross-border platforms like Temu, AliExpress, and Shein pose long-term threats, not by matching delivery speed but by leveraging low-cost Chinese supply chains to offer cheaper products. These players are unlikely to succeed in fresh food categories, but could gain traction in discretionary categories such as apparel, home living, small electronics, and toys, where timeliness is less critical.

We have not assigned a moat to its businesses outside of its Korean e-commerce business due to the lack of network effect and intangible assets.

Farfetch’s profitability and market share gains could improve faster under Coupang’s management, driving earnings growth for the firm.

Fulfillment and Logistics by Coupang gaining stronger-than-expected traction would lead to more market share gain in Coupang’s marketplace business.

Successful expansion into overseas markets such as Taiwan will help accelerate Coupang’s earnings growth.

Stronger competition from domestic and cross-border e-commerce companies could lead to lower-than-expected profitability for Coupang.

Coupang may face another large fine by regulators to combat its monopolistic behaviors, while the government may introduce more competition into the market.

If Farfetch and the Taiwan e-commerce business fail to improve profitability, this will drag on Coupang’s margin.