Reviewing Quarters From Coupang, Celsius, and Clear Secure

Trying to surf the wave of quarterly reports rolling in! In this article, we review results and guidance from Coupang, Celsius, and Clear Secure.

Coupang (CPNG)

Recently added Watch List stock Coupang reported its Q3 results. Revenue grew 21% year-over-year, and gross margin was up impressively from 24.2% a year ago to 25.3% this quarter. That may look small, but from volume-based businesses like this, small increases in gross margin lead to big increases in net income and cash flow. Active customers grew 14%, passing 20 million, and spend per customer grew 7% to $303. That 14% figure represents a solid acceleration from the 5% customer growth number in Q1. Coupang is executing well.

Taiwan looks to be a growth story. Rocket Delivery was launched there about a year ago, and has scaled faster than the original Korean operation. This bodes well for the future. Long-term growth opportunity is one of the risks with this stock.

In all, Coupang's quarter came in pretty much to our expectations. I'm raising the price target a bit from $18.50 to $19. The stock looks attractively valued, but just a touch under our 25% margin of safety to buy.

Celsius (CELH)

Celsius continues to be one of the more impressive growth stories we follow. Third quarter revenues soared 104%, reaching $385 million. This energy drink upstart is clearly catching on, with more distribution points and higher SKUs per location. It was rather difficult to find Celsius a few years ago. Now it is everywhere - grocery stores, convenience stores, vending machines, you name it!

This revenue windfall is leveraging the firm's cost structure. Gross margin reached 50.4%, a massive increase from 41.8% a year ago. This conforms to our original thesis, and given competitor Monster Energy's numbers, I think it can reach 60% ultimately.

Celsius is starting to establish itself as a brand that's here to stay. It is the #1 energy drink on Amazon, with a 21.4% share, ahead of Monster at 18.6% (and Redbull at 13%). Overall, it remains the #3 energy drink in the U.S. with 10.5% market share - up from just 4.4% a year ago.

I'm still bitter for not adding this one to the Buy List when first reviewed, but it is what it is. Taking these impressive growth and profitability numbers into account, the fair value gets another healthy hike from $156 to $169. The stock looks about fairly valued at present.

Clear Secure (YOU)

The market clearly has a differing opinion on Clear Secure than GreenDot Stocks does. Despite a run of very good quarterly results and a stock price that has consistently traded 30% or more below fair value, it is one of our worst performers, down 27% since recommendation.

Q3 was another strong quarter. Revenue grew 38.4%. Bookings (future revenues) grew 31.6%. Total enrollments (paid and free) grew 30.6% over last year to reach 18.6 million. CLEAR PLUS (paid members) grew 31.3% to 6.4 million. Uses of the platform reached 167.4 million, which was up 42.3% from a year ago. Retention was 88.5%, which continues the 5 quarter downtrend, but our original thesis never expected the company to maintain 90%+ retention rates. Mid-to-high 80% retention suits our model just fine.

There is plenty of business development to keep the growth going. TSA PreCheck by CLEAR, while it has had a slow rollout, is expected to start generating sales this year. The LinkedIn partnership is doing well to bring in new free users (as was likely the purpose of it). The company is rolling out its "Nextgen Identity+" next year, a facial-based system that will make CLEAR lanes even faster at airports. And it acquired Sora ID, which has a foothold in financial services, providing an attractive new vertical for identity solutions (financial firms must follow strict "know your customer" or KYC, rules).

All of this is on top of the company's typical stellar financial management. It has been buying back shares in the low $20 and teens prices, far below what I believe is a fair value price. It again raised its quarterly dividend, from $0.07 to $0.09/quarter, which is close to a 2% annual yield at current prices. A $0.55 special dividend was also declared.

So, in a nutshell, this still looks like an extremely well-run firm with plenty of future potential. The market is underestimating that potential right now - it won't be able to forever. Not only am I not lowering the fair value price, I'm actually raising it a bit from $41 to $43. The stock trades for less than half of that at present.