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Coupang (CPNG -11%) sinks today despite surpassing earnings and sales estimates in Q3 on a decent uptick in active customers and improving profitability within its new business division. Shares of the South Korean-based e-commerce company were gaining quickly since sinking toward multi-month lows in early August. The stock was at multi-year highs heading into Q3 results yesterday after the close, an over +20% move since August and a roughly +70% climb on the year. Given this context, CPNG's Q3 numbers, specifically its adjusted EPS, which was a penny less than last quarter, are not cutting it today, triggering a sell-the-news reaction.

• CPNG's Q3 adjusted EPS of $0.06 still marked another quarter of consistent profitability. Since shifting toward profits above growth in 2022, CPNG has delivered positive earnings in nine out of the past ten quarters. Management attributes this feat to a heightened focus on extracting efficiencies across its operations, such as deploying more automation and scaling margin-accretive offerings. Gross margins improved by 270 bps yr/yr when excluding Farfetch, the apparel company CPNG purchased earlier this year, to 28.1%.
• Revenue growth accelerated from last quarter, jumping by 27.2% yr/yr to $7.87 bln. Growth was largely supported by a 16% expansion in Product Commerce segment revs, which comprised 88% of Q3 revs. Average spend levels remained healthy in the quarter; net revs for active customers edged 4% higher yr/yr, or 8% in constant currency. Total active customers increased by 11% yr/yr to 22.5 mln.
• Complementing CPNG's core e-commerce business is its host of side gigs, including Eats (similar to DoorDash), Play (video streaming service), and Taiwan (services offered in the region), all contained in its Developing Offerings segment. This segment held its momentum enjoyed throughout the year, expanding revs by nearly 350% yr/yr, primarily lifted by Farfetch. When backing out this business, revs jumped by over 145%. Speaking of Farfetch, CPNG hit its milestone of reaching near-breakeven adjusted EBITDA in Q3, earlier than its year-end forecast.
• While CPNG does not issue formal guidance, management adds some comments. The company remains steadfast in its excitement over the untapped potential that lies ahead. However, it can take time for CPNG to continue to scale while maintaining profitability, particularly within its Developing Offerings segment. For instance, although Farfetch reached near-breakeven profitability in Q3, CPNG mentioned that there is still work to do before it begins to post consistent profits.

CPNG's Q3 report underscored steady upward momentum. Even though EPS may have dipped modestly lower sequentially, CPNG is delivering consistency amid a dynamic economic environment. Due to the nature of CPNG's investments and the timing of expenses, performance can fluctuate each quarter. However, over a longer timeframe, the company is conducting the right moves to expand its customer base and accelerate growth.