Stock Analysis

Institutions Believe in MercadoLibre, Inc.'s (NASDAQ:MELI) Outstanding Growth Prospects

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After 2 disappointing quarters, MercadoLibre, Inc. (NASDAQ:MELI) delivered a big surprise. The stock is now soaring towards a new all-time high.

With a capitalization of US$92b, the company is becoming a serious e-commerce competitor with a strong presence in one of the fastest-growing markets in the world, Latin America.

A Take on the Q2 Earnings

  • GAAP EPS: US$ 1.37 (beat by US$1.25)
  • Revenue: US$ 1.7b (beat by US$220m)
  • Total Payment Volume: US$7b, up 72% y/y

CFO Pedro Arnt quoted strong user base growth and increased financial services like insurance, debit card, and access to credit loans.

However, it is precisely the credit situation that worries some investors, as the Q2 Presentation shows that the consolidated credits portfolio growth reached US$810m, with 10.9% loans non-performing over 3 months and 6.3% non-performing over 6 months. This points out that the company might be loaning a bit more aggressively than it should.

NASDAQ:MELI - Consolidated Credits Portfolio; Source: Q2 Presentation

Meanwhile, the recent eMarketer report forecasts almost 250 million digital buyers in Latin America, expecting an impressive 10% growth.

After a June launch of same-day delivery to almost 20% of postcodes in Brazil, Amazon announced one-day delivery for 50 cities, as the competition for Latin America keeps heating up.

Generally speaking, as a company grows, institutions will increase their ownership. Conversely, insiders often decrease their ownership over time. We also tend to see lower insider ownership in companies that were previously publicly owned.

By taking a look at the ownership data, we will examine the shareholder structure. We can zoom in on the different ownership groups, to learn more about Mercado Libre.

Check out our latest analysis for MercadoLibre.

NasdaqGS:MELI Ownership Breakdown August 14th 2021

What Does The Institutional Ownership Tell Us About MercadoLibre?

As you can see, institutional investors have a fair amount of stake in MercadoLibre. This implies the analysts working for those institutions have looked at the stock, and they like it. But just like anyone else, they could be wrong. If multiple institutions change their view on a stock simultaneously, you could see the share price drop fast. It's, therefore, worth looking at MercadoLibre's earnings history below. Of course, the future is what really matters.

NasdaqGS:MELI Earnings and Revenue Growth August 14th, 2021

Institutional investors own over 50% of the company, so together than can probably strongly influence board decisions. We note that hedge funds don't have a meaningful investment in MercadoLibre. The company's largest shareholder is Capital Research and Management Company, with ownership of 12%. With 9.3% and 7.8% of the shares outstanding respectively, Baillie Gifford & Co. and Galperin Trust are the second and third largest shareholders.

A closer look at our ownership figures suggests that the top 12 shareholders have a combined ownership of 51% implying that no single shareholder has a majority.

While studying institutional ownership for a company can add value to your research, it is also an excellent practice to research analyst recommendations to understand a stock's expected performance better. Quite a few analysts cover the stock, so you could look into forecast growth quite easily.

Insider Ownership Of MercadoLibre

While the precise definition of an insider can be subjective, almost everyone considers board members to be insiders. Company management runs the business, but the CEO will answer to the board, even if they are a member of it.

I generally consider insider ownership to be a good thing. However, it makes it more difficult for other shareholders to hold the board accountable for decisions on some occasions.

Our information suggests that MercadoLibre, Inc. insiders own under 1% of the company.

However, it's possible that insiders might have an indirect interest through a more complex structure. Being so large, we would not expect insiders to own a large proportion of the stock. Collectively, they own US$256m of stock. It is good to see board members owning shares, but it might be worth checking if those insiders have been buying.

General Public Ownership

The general public holds 9.1% stake in MercadoLibre, which represents a relatively small class of owners. Thus, only a relatively small part of the company is controlled by retail investors. Since they are only a small group of shareholders in the company, they can do little if their interests are not prioritized.

Private Company Ownership

Our data indicate that Private Companies hold 7.8% of the company's shares. Private companies may be related parties. Sometimes insiders have an interest in a public company through a holding in a private company, rather than in their own capacity as an individual. While it's hard to draw any broad stroke conclusions, it is worth noting as an area for further research.

Next Steps:

It's always worth thinking about the different groups who own shares in a company. But to understand MercadoLibre better, we need to consider many other factors. Consider risks, for instance. Every company has them, and we've spotted 2 warning signs for MercadoLibre you should know about.

If you are like me, you may want to think about whether this company will grow or shrink. Luckily, you can check this free report showing analyst forecasts for its future.

NB: Figures in this article are calculated using data from the last twelve months, which refer to the 12-month period ending on the last date of the month the financial statement is dated. This may not be consistent with full-year annual report figures.

What are the risks and opportunities for MercadoLibre?

MercadoLibre, Inc. operates online commerce platforms in Latin America.

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  • Trading at 26.8% below our estimate of its fair value

  • Earnings are forecast to grow 38.76% per year

  • Earnings grew by 247.2% over the past year


  • Has a high level of debt

View all Risks and Rewards

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Simply Wall St analyst Stjepan Kalinic and Simply Wall St have no position in any of the companies mentioned. This article is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material.

Stjepan Kalinic

Stjepan Kalinic

Stjepan is a writer and an analyst covering equity markets. As a former multi-asset analyst, he prefers to look beyond the surface and uncover ideas that might not be on retail investors' radar. You can find his research all over the internet, including Simply Wall St News, Yahoo Finance, Benzinga, Vincent, and Barron's.

About NasdaqGS:MELI


MercadoLibre, Inc. operates online commerce platforms in Latin America.

The Snowflake is a visual investment summary with the score of each axis being calculated by 6 checks in 5 areas.

Analysis AreaScore (0-6)
Future Growth6
Past Performance5
Financial Health4

Read more about these checks in the individual report sections or in our analysis model.

Exceptional growth potential with solid track record.