E-commerce is getting interesting again, but geography plays a role in growth
Online consumer stocks are looking really interesting right now. The global economic crisis seems to be off the table and geopolitical tensions are limited to a few specific regions. Time to let the undervalued giants rally? Yes, they aren’t flashy AI names, but through secular trends like growing consumer spending in emerging markets, top-line growth can reach similar heights. Looking at the whole industry, Amazon is the obvious one, with a bet on margin expansion driven by AI, robotics, and AWS. The e-commerce behemoth lagged behind its fellow Mag7, with no notable gains in the stock since the same time last year. MercadoLibre is basically the LatAm version of that story. Higher risk, but also higher reward, due to geographic factors in the region.
But beyond these two names, analysts and investors alike also like two more niche names: Sea and Coupang. Both promise long runways on a similar playing field, with subtle differences. So the question is which one actually offers the better risk/reward today.
On the surface, the business models look very similar: dominant regional e-commerce platforms, payments, logistics, and optionality beyond retail. But the underlying markets couldn’t be more different. Coupang operates primarily in South Korea, a highly developed, highly competitive, and very mature market. Sea, on the other hand, is concentrated in Southeast Asia, where rising income levels, improving infrastructure, and increasing digital adoption are doing a lot of the heavy lifting without additional effort needed. That also explains the divergence in outlook for the two companies. One can lean back and focus on mindful execution, while the other needs to come up with ways to force growth.
Coupang’s challenge is twofold. First, South Korea’s demographics are working against it. South Korea’s population is getting old. And it’s not like many countries in Europe that struggle to refinance their pension system with a birth rate of 1.5, it’s so much worse: South Korea has the world’s lowest birth rate, around 0.7, far below the replacement level of 2.1. This leads to long-term consumer growth being structurally capped. Therefore, to maintain high growth rates, Coupang will eventually need to expand internationally (like it already does in Taiwan), which means heavy reinvestment and execution risk. Growth is projected around ~15% annually, with margin expansion doing most of the earnings work. The balance sheet is solid, with roughly $5 billion in cash, but the FCF yield is still low at ~2% today, even if it’s projected to improve meaningfully over time (~7% by 2027).
Sea’s setup feels more organic, but also slightly more risky. Revenue growth is projected north of 20–30% annually through 2025–2027, with cash flow expanding at a similar pace. No debt, nearly $8 billion in cash, and a business that benefits directly from improving quality of life in emerging markets. The stock is down almost 40% from its YTD highs and trades at a ~5% FCF yield. Not dirt cheap, but more than fair given the growth. I used that weakness to open a position around $125. So, if you haven’t figured it out so far: Yes, I’m siding with Sea here. The positives and opportunities just outweigh any risks, especially at the current price.
I’m happy with Sea here, alongside MercadoLibre for LatAm. Coupang remains interesting, but Sea offers the cleaner growth story and better upside, in my view. Now, the only thing left is to build an Amazon position.
