A cheap giant with big ambitions: The Korean Amazon at a 22% discount
When a quality, growing company's stock drops by a fifth in a year, it's worth paying attention. Either something fundamental went wrong, or the market panicked over temporary issues and is offering an opportunity. The company we're talking about is exactly such a case to examine. It's the dominant e-commerce player in one of the world's most advanced markets, its revenues are growing, and its customers remain loyal. And yet its stock has fallen, and its accounting profit is practically zero.
Key points
The stock fell 22% over the year to around $16, even though the core business is growing at a double-digit pace and customers are spending at record levels.
The price-to-earnings ratio of 141 looks absurd, but the profit is deliberately squeezed to zero by massive investments in expansion.
Customers who stayed or returned after last year's data breach are now spending 16% more than before.
The company is building a second Korea in Taiwan: three automated centers already cover 70% of the population and are growing at triple-digit rates.
Its logistics network with same-day delivery is a moat that even global giants have so far failed to replicate.
The company isn't making money not because it can't, but because it doesn't want to, at least for now. It takes all the profit from its highly profitable home business and pours it into building a new empire in another market, which it aims to make a second home as large as the first. On top of that, one-off blows from the past year have further distorted the financial results. The result is a company that on paper looks loss-making and overpriced, but underneath hides a highly profitable core.
And this is where the interesting question arises. The market got spooked by the temporary margin compression, slowdown, and a series of bad news, and wrote the company off. But anyone who looks under the surface sees a recovering customer base, rapid growth in a new market, and one of the strongest logistics positions in the world. The question is whether those temporary problems mask permanent deterioration, or conversely, have created an opportunity to buy a great company at a discount.
The answer isn't whether it's a quality business. The dominance and customer loyalty speak for themselves. It's whether the company can turn today's painful investments into future profits, and whether the fallen stock price is an opportunity or a warning sign.