| Snowflake Score | |
|---|---|
| Valuation | 2/6 |
| Future Growth | 5/6 |
| Past Performance | 3/6 |
| Financial Health | 4/6 |
| Dividends | 0/6 |
MELI Stock Overview
MercadoLibre, Inc. operates online commerce platforms in Latin America.
MercadoLibre, Inc. Competitors
Price History & Performance
| Historical stock prices | |
|---|---|
| Current Share Price | US$1,081.08 |
| 52 Week High | US$1,970.13 |
| 52 Week Low | US$600.69 |
| Beta | 1.67 |
| 1 Month Change | 64.86% |
| 3 Month Change | 35.99% |
| 1 Year Change | -41.61% |
| 3 Year Change | 73.10% |
| 5 Year Change | 357.81% |
| Change since IPO | 3,693.26% |
Recent News & Updates
MercadoLibre: The Crystal Ball Looks Rich Ahead - Wait For The Rally To Be Digested
A friendly reminder that MELI will be reporting FQ2'22 earnings on 03 August 2022. MELI is expected to massively improve its sales by 230% and profitability by 13,125% in FY2024, potentially triggering a long-term stock price appreciation. The doubling of e-commerce penetration in Latin America will likely increase MELI's market share beyond the current 30% by 2025 as well. MELI remains a solid stock for long-term investing, though we prefer the safety margin that $600s will offer. Investment Thesis MercadoLibre, Inc (MELI) appears well poised for growth, given the massive ramp-up in its operations, successful user acquisition, and stellar penetration in the marketplace, logistics, fintech, and credit segments in Latin America. Given the potential doubling in e-commerce penetration by 2025, we expect to see MELI perform exemplarily ahead, due to its current lion's market share of 30% in the region. Nonetheless, it is also evident that MELI is trading at a premium now, potentially boosted by Amazon's (AMZN) announcement of Prime Day in mid-June 2022 and stellar sales in mid-July 2022. Therefore, even though MELI is a solid stock, we prefer the margin of safety that $600s will offer to long-term investors. Interested buyers, do wait for the current rally to be digested. MELI Has Reached The Inflection Point Of Its Future Growth S&P Capital IQ MELI had obviously benefited from the boom in e-commerce during the height of the COVID-19 pandemic, given the massive jump in its revenue CAGR at 75.33% between FY2019 to FY2021, compared to pre-pandemic CAGR of 39.9%. This has pulled forward its growth by two years, indeed. By the LTM, MELI reported revenues of $7.94B and gross margins of 51.1%, representing massive growth of 345.2% though a moderation of 5.1 percentage points from FY2019 levels, respectively. In the meantime, the company managed to finally report profitability breakeven in FY2020, with net incomes of $0.18B and net income margins of 2.3% in the LTM, indicating an increase of 200% and 9.8 percentage points from FY2019 levels, respectively. S&P Capital IQ MELI had also grown its operating expenses prudently in the past two years, with total expenses of $2.99B in the LTM, representing an increase of 239.2% from FY2019 levels. However, it is essential to note that the ratio to its growing revenues and gross profits has been moderating thus far, accounting for 37.7% of its revenue and 73.7% of its gross profits in the LTM. Nonetheless, since MELI had guided a new hiring spree of 14K headcount for the rest of FY2022, we expect to see a notable spike in its operating expenses ahead. S&P Capital IQ Due to its improved profitability, MELI has been reporting slight improvements in its Free Cash Flow ((FCF)) generation thus far, with an FCF of $0.4B and an FCF margin of 5% in the LTM. This represents an increase of 29% though a notable decline of 8.7 percentage points from FY2019 levels. Nonetheless, we are not overly concerned since MELI still reports robust cash and equivalents of $2.41B on its balance sheet simultaneously. S&P Capital IQ MELI has also been growing its capabilities thus far, with net PPE assets of $1.51B and capital expenditure of $0.6B in the LTM, indicating an increase of 343.1% and 428.5% from FY2019 levels, respectively. We are confident that these investments would eventually prove to be top and bottom lines accretive - given its aggressive expansion into emerging markets and growing market share thus far. However, given its minimal profitability thus far, it is evident that MELI has taken up more debt obligations in the past few years. By the LTM, the company reported long-term debts of $2.6B and interest expenses of $0.19B, representing an increase of 419.3% and 271.4% from FY2019 levels, respectively. MELI Debt Maturity Seeking Alpha In the meantime, we are not overly concerned about MELI's debts since none are maturing within the year, though the company is looking at $128M of debt maturity by FY2024. Not a concern, though, given its war chest of cash and equivalents and improved profitability by then. MELI Is Super-Charged For Growth Ahead S&P Capital IQ Over the next three years, MELI is expected to report impressive revenue and net income growth at a CAGR of 33.53% and 132.73%, respectively. Its net income margins are also likely to improve over time, from 1.2% in FY2021 to 6.2% in FY2024. For FY2022, consensus estimates that MELI will report revenues of $10.25B and net incomes of $0.35B, representing tremendous YoY growth of 45.1% and 421.6%, respectively. MELI's Operational Growth Metrics Seeking Alpha In the meantime, analysts will be closely watching MELI's FQ2'22 performance, with consensus revenue estimates of $2.51B and EPS of $1.85, indicating a remarkable increase of 47.14% and 35.22% YoY, respectively, despite the reopening cadence. Since its peers, such as Amazon, had outperformed its recent Q2 earnings call ( with Prime Day incorporated in FQ3'22 no less ), we expect MELI to continue smashing estimates as well, as observed in FQ1'22. We shall see. The eventual recovery of MELI's stock price is highly dependent on the growth in its operating metrics in FQ2'22, which have proven stellar in FQ1'22. The slightest whisper of decelerating growth would likely reverse its current stock gains. However, we are cautiously optimistic, since we expect continued stickiness ahead for consumer behavior in its marketplace, logistics, fintech, and credit segments post-reopening cadence. MELI's Leading Market Share In Latin America Forbes & Bloomberg The e-commerce market in Latin America is also expected to grow from $209B in 2020 to $580B in 2025, at a CAGR of 29%. In addition, e-commerce penetration in Latin America is expected to double from 8% in 2020 to 16% in 2025, which indicates a massive opportunity for MELI's growth since it has the lion's market share of 27% in Brazil, 68% in Argentina, and 13.6% in Mexico as of March 2022, with an average of 30% for the whole of Latin America. These numbers are almost as impressive as Amazon, which is expected to hit the majority at 39.5% of market share in the US e-commerce by the end of 2022. Therefore, we are highly encouraged that MELI's aggressive expansion will start paying off handsomely over the next few years. Thereby, potentially triggering a long-term stock price appreciation.
An Intrinsic Calculation For MercadoLibre, Inc. (NASDAQ:MELI) Suggests It's 40% Undervalued
Does the July share price for MercadoLibre, Inc. ( NASDAQ:MELI ) reflect what it's really worth? Today, we will...
MercadoLibre: Likely Bottomed Despite Massive Headwinds
MercadoLibre is the leading e-commerce and FinTech behemoth in LatAm. But its sizeable exposure in the volatile region has been a cause for concern for the market in 2022. We believe the near-term macro headwinds could be peaking, as MELI seems close to a long-term bottom. MELI has been basing constructively since May. Our valuation model indicates that MELI could be re-rated in the medium term if management can continue executing well and gaining massive operating leverage. Therefore, we reiterate our Buy rating on MELI. Thesis MercadoLibre, Inc. (MELI) stock has been consolidating at its near-term support since May. Even though the market attempted a further sell-off in June and July, the buying support has been resilient. However, macro headwinds in LatAm have continued to dampen the likelihood of a re-rating in the near term. High inflation and surging energy costs in Brazil have destabilized the political climate. Also, it could further impact MELI's FinTech and lending business if inflation or inflation rates continue to rise. Notwithstanding, we believe that a medium-term re-rating could be in the works, given MercadoLibre's expected operating leverage gains. Therefore, investors are urged to sit tight and layer in their exposure over time at critical support levels, given its bearish bias. MELI also seems to be at a potential long-term bottom (not validated yet), which further supports our medium-term re-rating thesis. As a result, we reiterate our Buy rating on MELI and urge investors to be patient. Brazil's Inflation Is Concerning But Could Peak Moving Forward Given the surging inflation, exacerbated by rising energy costs, companies with sizeable LatAm exposure have been battered in 2022. It has also complicated Brazilian President Jair Bolsonaro's bid to be reelected this year, which also caused further political uncertainty in the country. However, Kapitalo Investimentos Ltda (a leading Brazilian hedge fund) thinks that the surging inflation rates in Brazil could slow moving forward. It has also been executing positions to capitalize on the potential of falling inflation rates, as the firm accentuated (edited): We think investors are overestimating inflation, and we are taking positions that will profit when those expectations come down. Five-year breakevens -- the inflation rate implied by prices in the bond market -- reached 7.58% last month, the highest since 2016. Premiums look attractive. - Bloomberg Therefore, we believe the market has been pricing in such headwinds since early 2022. MercadoLibre's FinTech and lending portfolio could be further impacted, worsening the impact of e-commerce's growth normalization. It added in its filings (edited): Like other businesses with significant exposure to credit losses, we face the risk that Mercado Credito merchants and consumers will default on their payment obligations, making the receivables uncollectible and creating the risk of potential charge-offs, which could impact our liquidity. Any of these events could adversely affect our business and the results of operation. The funding and growth of our Mercado Credito business are directly related to interest rates; a rise in interest rates may negatively affect our Mercado Credito business and the results of operations. (MercadoLibre 10-Q) But MercadoLibre Could Gain Operating Leverage Rapidly MELI revenue change % and adjusted net margins % consensus estimates (S&P Cap IQ) The consensus estimates (very bullish) suggest that the company could continue gaining leverage markedly, even though revenue growth is expected to moderate further through FY24. The company has been investing aggressively in its FinTech and logistics/fulfillment business which has impacted its operating profile in the near term. However, if the company can continue executing well, such leverage gains could drive the market to re-rate MELI. Furthermore, if the inflation environment in Brazil improves further, we believe it will drive the recovery in its topline growth and margins and help undergird its valuation.
MercadoLibre: Value, Growth And Outstanding Execution
MercadoLibre is the "Amazon of Latin America" as the Ecommerce market leader in the region. MELI has two strong growth engines, which are Ecommerce and Fintech. The Latin American Market has many secular tailwinds across increasing Ecommerce and fin-tech payment penetration. MELI had a strong first quarter of 2022 with Revenue of $2.2 Billion, up a rapid 67% year over year. The stock is undervalued intrinsically, according to my DCF Valuation Model. MercadoLibre, Inc. (MELI) is the often referred to as the "Amazon of Latin America." A best-in-breed growth stock, which is dominating an emerging market and has a huge growth runway ahead across its twin engines of Ecommerce and Fintech. Total payment volume increased by a blistering 81% year over year, while Net Revenue jumped by a rapid 67%. So, why is the stock down 67% since September 2021? In one word, "Fear," in two words, "Interest Rates," and in three words, "Supply Chain Constraints." Despite the Macroeconomic issues which are like a dark cloud hanging over the stock market, I believe these issues are temporary and, by zooming out, we can gain perspective. The story hasn't changed for MercadoLibre. In a prior post I outlined extensively MELI's market position and market opportunity. Here is a brief summary of five secular opportunities: 1. E-Commerce penetration is still low in South America. E-commerce penetration in Latin America is forecasted to double from 8% today to 16% in 2025. The USA had 20% ecommerce penetration in 2020, and thus the growth runway is huge for Latin America. 2. Increasing Smartphone Penetration In Latin America, cell phone penetration is forecasted to reach over 73% in 2025, up from 68% in 2019. This is expected to further increase e-commerce sales and Fintech adoption in South America. 3. Market Leader According to Web Retailer, MercadoLibre is the "clear leader" in Latin America with 667 million website visits per month, compared to just 169 million by Amazon (AMZN) in the region. Online Marketplaces (Web Retailer) 4. Country Leader MercadoLibre is the market leader in three main markets; Brazil - 27% market share Argentina -68% market share Mexico 13.6%. The region's largest e-commerce market is Brazil, which makes up approximately one third (32.5%) of all e-commerce volume in Latin America. Ecommerce Market share (Bloomberg Data) 5. Fin-tech Opportunity According to a McKinsey study, cash is the most common form of payment in Latin America. Paper money made up a ~87% of payments in Argentina for 2020, compared to just 28% in the USA. The trend towards cashless payments is expected to continue globally, but the Latin American region has a greater growth runway. Cash Usage by country (McKinsey Payments Report) The market opportunity is strong for MercadoLibre and after the substantial pullback, the stock is now undervalued intrinsically. Let's dive into the Business Model, Financials, and Valuation to find out more. Twin Growth Engines Given the aforementioned backdrop, MercadoLibre should be the perfect stock as it's two core business segments, which I call the "twin engines" of growth are both Ecommerce and Fin-tech. 1. Ecommerce Engine Mercado's ecommerce marketplace had over 330 million live listings and approximately 40 million buyers in the first quarter of 2022, which was an improvement over last year. Gross Merchandise volume was $7.7 billion, up 31.6% year over year. Strong growth of 73% is seen in Argentina, which is the third largest region by GDP in Latin America, after Brazil and Mexico. Gross Merchandise Volume (MercadoLibre) Mercado's marketplace offers a diverse product mix which helps to ensure stable volume even during times when consumers cut back on luxury spending. The company noted "positive trends" in shopping conversion rates and greater "stickiness" with both buyers and sellers. Similar to Amazon in the U.S., MercadoLibre has been investing heavily into building out it's logistics and fulfilment network. They have network penetration of 91%, up from 89% in the prior quarter, and 54% of shipments were offered as same day or next day delivery in the first quarter of 2022. They have over 5,800 active stores enabled in Latin America, which enable efficient pickup and drop off. I believe this vast network is a key competitive advantage for the company and acts as a moat against competitors, who would have to risk a lot investing into CapEx to compete. MELI Logistics (Q1 Investor report) Advertising is another key area of investment by the company and they have employed "algorithm technology" to target ad's based on user searches. Management states there are "several opportunities" to create more layers of advertising real estate. As a comparable, Amazon has tailored advertising recommendations to each user based on buying habits. They are now in a "tripoly" with Google Ads (GOOG, GOOGL) and Facebook (META) in the advertising market, with substantial room to grow. I see no reason why MercadoLibre couldn't do the same for the Latin American Market. The company noted in the first quarter ad revenues nearly doubled, although a breakdown of figures was not given. 2. Fintech Engine Fintech is poised to be the growth engine for MercadoLibre's business due to the aforementioned trends. I believe this can be the growth engine for MELI, as the Cloud Service is for Amazon. MercadoLibre's Fintech segment includes a variety of services from a Digital Payment Network to P2P (Peer to Peer) payments, Buy Now Pay Later ((BNPL)), pre paid debit cards and a Money Market Investment fund. The company even introduced a crypto wallet for Brazilian customers. Unique Fin-tech users were up 31% year over year, with 23 million investment accounts active with their asset management product. Unique Fintech users (MercadoLibre) Total Payment Volume surpassed $25 billion dollars, up a rapid 81.2% compared to the same time last year. With "Acquiring" Total Payment Volume, which includes payments from OnPlatform (used with the marketplace) and merchant services increasing by 52% to $17.4 billion. Digital Accounts is the fastest growing segment, with Total payment volume of $8 billion, up 180% year over year. This segment includes Wallet Payments, P2P transfers and cards such as prepaid, credit and debit. Total Payment volume (Earnings Q1 report) Mercado's Credit portfolio ("Mercado Credito") is also a key part of the growth story. It's consolidated credit portfolio reached $2.4 Billion, up 319% compared to the first quarter of 2022. This portfolio includes loans to merchants (online and in store), consumers and credit card portfolio. The company has given active loans to 10 million merchants and consumers as of the first quarter. Credit Portfolio (Mercadolibre) A slight concern for investors has been the increase in non performing loans, which increased from 21.3% in Q120 to 27.6% in Q122. Management offered some color around the increase in the first quarter earnings call. They stated this increase was due to "product mix" and are confident around the data they use for underwriting. However, this could be a metric to keep an eye on for investors. Growing Financials At a high level, net revenue was $2.2 billion, up a rapid 63% compared to the equivalent quarter last year. However, it should be noted that revenue growth rates are declining quarter over quarter, which can be partially offset by the larger revenue base and are still great overall. Net revenue Meli (MercadoLibre) Gross profit was $1 Billion at a margin of 47.7% higher than the 42.9% in the first quarter of 2021. This was driven by increased cost efficiency in the shipping network and operational leverage on payment collection fee's. The Operating Margin was fairly stable at 6.2% and generated $139 million in operating income. Data by YCharts
Shareholder Returns
| MELI | US Online Retail | US Market | |
|---|---|---|---|
| 7D | 5.5% | -1.7% | 1.3% |
| 1Y | -41.6% | -28.4% | -11.7% |
Return vs Industry: MELI underperformed the US Online Retail industry which returned -28.4% over the past year.
Return vs Market: MELI underperformed the US Market which returned -11.7% over the past year.
Price Volatility
| MELI volatility | |
|---|---|
| MELI Average Weekly Movement | 12.3% |
| Online Retail Industry Average Movement | 12.8% |
| Market Average Movement | 7.8% |
| 10% most volatile stocks in US Market | 16.9% |
| 10% least volatile stocks in US Market | 3.2% |
Stable Share Price: MELI is more volatile than 75% of US stocks over the past 3 months, typically moving +/- 12% a week.
Volatility Over Time: MELI's weekly volatility (12%) has been stable over the past year, but is still higher than 75% of US stocks.
About the Company
| Founded | Employees | CEO | Website |
|---|---|---|---|
| 1999 | 29,957 | Marcos Eduardo Galperín | https://www.mercadolibre.com |
MercadoLibre, Inc. operates online commerce platforms in Latin America. It operates Mercado Libre Marketplace, an automated online commerce platform that enables businesses, merchants, and individuals to list merchandise and conduct sales and purchases online; and Mercado Pago FinTech platform, a financial technology solution platform, which facilitates transactions on and off its marketplaces by providing a mechanism that allows its users to send and receive payments online, as well as allows users to transfer money through their websites or on the apps. The company also offers Mercado Fondo that allows users to invest funds deposited in their Mercado Pago accounts; Mercado Credito, which extends loans to certain merchants and consumers; and Mercado Envios logistics solution that enables sellers on its platform to utilize third-party carriers and other logistics service providers, as well as fulfillment and warehousing services for sellers.
MercadoLibre, Inc. Fundamentals Summary
| MELI fundamental statistics | |
|---|---|
| Market Cap | US$54.42b |
| Earnings (TTM) | US$237.30m |
| Revenue (TTM) | US$8.83b |
229.3x
P/E Ratio6.2x
P/S RatioIs MELI overvalued?
See Fair Value and valuation analysisEarnings & Revenue
| MELI income statement (TTM) | |
|---|---|
| Revenue | US$8.83b |
| Cost of Revenue | US$4.25b |
| Gross Profit | US$4.59b |
| Other Expenses | US$4.35b |
| Earnings | US$237.30m |
Last Reported Earnings
Jun 30, 2022
Next Earnings Date
n/a
| Earnings per share (EPS) | 4.71 |
| Gross Margin | 51.92% |
| Net Profit Margin | 2.69% |
| Debt/Equity Ratio | 278.0% |
How did MELI perform over the long term?
See historical performance and comparison