Alibaba vs. Coupang: Which Asian E-Commerce Stock Is a Better Buy?

NYSE: BABA | Alibaba Group Holding Ltd News, Ratings, and Charts

BABA – Alibaba (BABA) and Coupang (CPNG) are two Asian e-commerce companies that are growing revenue at a fast clip. Both are market leaders in their respective countries and are well poised to outpace broader market gains in 2021 and beyond.

In the last decade, e-commerce companies have been on an absolute roll. Online shopping platforms, such as Amazon (AMZN) and Shopify (SHOP), have created massive wealth for investors. Even amid the COVID-19 pandemic, e-commerce companies were some of the best-performing stocks in the market.

These firms are poised to continue to beat the broader markets in the upcoming decade as well, given the shift in consumer behavior and accelerated growth towards online shopping. Here we look at two stocks in the e-commerce space – Alibaba (BABA) and Coupang (CPNG) – to analyze which is a better buy right now.

The bull case for Alibaba

Alibaba is often compared with Amazon, and for good reason. The former is one of the largest e-commerce platforms in China, and similar to Amazon, it also has a thriving public cloud business.

Other business segments include Taobao,an online marketplace that is China’s largest mobile commerce platform. Alibaba launched Tmall in 2008, where brands can create their digital storefront.

Alibaba also has a grocery retail chain called Freshippo and AliExpress is an online marketplace where it connects manufacturers and distributors to customers. The Ant Group which is Alibaba’s digital payments business has served a billion users in fiscal 2020, indicating the company is an internet behemoth and one that is firing on all cylinders.

However, Alibaba is facing some regulatory issues.  Last December the government in China launched an antitrust probe into its e-commerce division. They are looking into Alibaba’s exclusive deals with merchants and promotional prices for new users. The Chinese government also stopped the planned IPO of Ant Group, which Alibaba owns a 33% stake in, due to additional antitrust concerns.

In fiscal 2020, Alibaba claimed its gross merchandise volume surged over $1 trillion. This figure is really incredible given China’s retail spending on consumer goods is around $6 trillion. Alibaba accounted for over 50% of China’s online sales, according to market research company eMarketer.

Despite Alibaba’s market leadership in China and its stellar growth rates, the company is undervalued compared to its peers. It’s trading at a forward price to sales multiple of 6x and a price to earnings multiple of 23x.

Comparatively, analysts expect Alibaba to increase sales by 39% to $109 billion in 2021 and by 31% to $142.6 billion in 2022. The company’s earnings are also forecast to grow by 26.8% in 2021 and 16.7% in 2022.

While growth stocks command a premium, Chinese companies generally trade at a discount. This is due to the lack of transparency and regulatory issues surrounding the companies.

The bull case for Coupang

Coupang is a South Korean based company and last week went public on the NYSE. The company priced its shares at $35 and is currently trading above $44, a gain of over 25%.

Coupang is also likened to Amazon and is one of the top South Korean brands due to its focus on customer service and enviable delivery times. In 2020, Coupang generated revenue of $12 billion, an increase of 91% year over year. Comparatively, its sales were up 55% in 2019, 69% in 2018, and 44% in 2017.

While Alibaba is profitable, Coupang is still reporting an adjusted loss. In 2020, its net loss stood at $475 million which was lower than its net loss of $699 million in 2019. The company also spent $500 million in capital expenditures and reported a negative free cash flow in 2020.

Coupang raised $3.5 billion in its IPO and this capital will be deployed to fund its stellar growth. The company is valued at a market cap of $75 billion, indicating a trailing price to sales multiple of 12x, which is not too expensive considering its growth rates.

The final takeaway

Alibaba and Coupang are market leaders in their respective countries. The two stocks are also trading at reasonable valuations compared to peers and remain a solid long-term bet given the massive potential for e-commerce growth at the global level.

It’s really difficult to choose between these billion-dollar tech giants but if given an option, I would invest in Coupang, as its growing top-line at a much faster rate. Further, regulatory issues surrounding Alibaba make it a riskier pick, despite the company’s strong fundamentals.

Want More Great Investing Ideas?

How to Ride the NEW Stock Bubble?

“MUST OWN” Growth Stocks for 2021

5 WINNING Stocks Chart Patterns

11 Top Stocks for March 2021

BABA shares were trading at $240.45 per share on Friday morning, up $4.02 (+1.70%). Year-to-date, BABA has gained 3.32%, versus a 4.26% rise in the benchmark S&P 500 index during the same period.

About the Author: Aditya Raghunath

Aditya Raghunath is a financial journalist who writes about business, public equities, and personal finance. His work has been published on several digital platforms in the U.S. and Canada, including The Motley Fool, Finscreener, and Market Realist. More...

More Resources for the Stocks in this Article

TickerPOWR RatingIndustry RankRank in Industry
BABAGet RatingGet RatingGet Rating
CPNGGet RatingGet RatingGet Rating

Most Popular Stories on

:  |  News, Ratings, and Charts

3 Signs of a NEW Stock Market Bubble

Value investors are pounding the table that the stock market (SPY) is already in bubble territory not unlike 1999. Indeed they are right about the lofty valuation levels. But they are wrong that it’s time to get ready for the next bear market to emerge. Check out Steve Reitmeister's game plan to ride the bubble up and then parachute out at the right time. Read on for more...

:  |  News, Ratings, and Charts

Top 10 Value Stocks

The S&P 500 (SPY) has shown mixed results in the last week, but if you are a value investor, then yesterday was a big day. That’s when we revealed to our readers the fatal flaws of traditional value investing and the solution to this problem—our Top 10 Value Stocks strategy. Read on below to find out more about this 3-step process and its +38.63% annual returns…

:  |  News, Ratings, and Charts

3 Housing Market Stocks to Buy on the Dip

The housing market's strength is going to continue well into the next decade due to favorable supply and demand factors.

:  |  News, Ratings, and Charts

Finding Gems Amid the Market Wreckage

The S&P 500 (SPY) selloff has intensified this past week. So far, it’s looking and behaving like a culmination of the market’s rotation out of growth stocks. We’ve seen big declines in certain parts of the market from the big winners of 2020 that peaked in mid-February. Since their recent highs - the cannabis ETF (MJ) is down 44%; the cloud computing ETF (WCLD) is down 27%; and the semiconductor ETF (SMH) is down 14%. In today’s commentary, I cover some of the opportunities that have been created, ways to take advantage, and what I’m monitoring when it comes to the broad weakness in the market. Read on below to find out more…

:  |  News, Ratings, and Charts

3 Housing Market Stocks to Buy on the Dip

The housing market's strength is going to continue well into the next decade due to favorable supply and demand factors.

Read More Stories

More Alibaba Group Holding Ltd (BABA) News View All

Event/Date Symbol News Detail Start Price End Price Change POWR Rating
Loading, please wait...
View All BABA News