Breaking News
0
Ad-Free Version. Upgrade your Investing.com experience. Save up to 40% More details

MercadoLibre: Expanding E-Commerce Behemoth, with Risks Attached

Stock MarketsSep 28, 2021 06:00PM ET
Saved. See Saved Items.
This article has already been saved in your Saved Items
 
© Reuters. MercadoLibre: Expanding E-Commerce Behemoth, with Risks Attached

MercadoLibre (NASDAQ:MELI) is the most comprehensive ecommerce ecosystem in Latin America in terms of unique visitors and page views.

It has a strong footprint in 18 countries, including Brazil, Argentina, Mexico, Chile, and Peru. The company facilitates commerce through its marketplace platform, which empowers users to buy and sell in most of Latin America.

Its other services include fintech solutions, advertising, e-store setup, and loan financing.

Due to its diversified operations and ever-expanding e-commerce model, the company is often referred to as the Amazon (NASDAQ:AMZN) of Latin America.

The stock has rallied by 63.3% over the past year, and shares could have more upside ahead. Still, risks persist, and since the potential upside does not seem to scream a buying opportunity, I am neutral on the stock. (See MELI stock charts on TipRanks)

Rapidly Growing Results

In Q2 2021, MercadoLibre's gross merchandise value grew 46% in local currency to $7 billion. Items sold surpassed 244 million on the platform, producing $1.7 billion in net revenue during the quarter, a 102.6% increase year-over-year.

MercadoLibre's growth remains therefore incredibly strong, with little to no signs of slowing down.

As far as its fintech business goes, Total Payments Volume (TPV) advanced 72% year-over-year to $17.5 billion, while credit originations reached $703 million, a 429% year-over-year improvement.

These are very impressive growth numbers for a relatively huge company (market cap of $84 billion) with MercadoLibre's payment solutions, especially, showing huge potential. The company's solutions are quite close to that of PayPal (NASDAQ:PYPL), and are not necessarily constricted within MercadoLibre's. Specifically, in Q2, around 60% of TPV occurred outside of MercadoLibre's e-commerce platform.

As its fintech ecosystem grows, MercadoLibre's offering of investment accounts should also bolster the company's financials. There are now more than 19 million customers in the company's asset management product.

The reason MercadoLibre's leading position in Latin America could result in unlocking a great potential here is that the population in Latin America is significantly unbanked. In Brazil, around 10% of the adult population does not even have a bank account. In Argentina, less than 50% of all adults have a bank account. Hence, there is an incredibly large untapped market for the company to capture.

Valuation And Risks

MercadoLibre is currently trading at around 13 times its forward sales, which is not a crazy-high multiple considering its ongoing expansion.

Analysts essentially price the company at 28 times its FY2025 potential net income, which is a rather reasonable pricing estimate.

That said, there are some risks not to be ignored. The first is regarding foreign exchange rates. Not only are MercadoLibre's revenues subject to various Latin American currencies, which are often very volatile, but U.S. investors face another conversion to USD before getting the company's final results.

Further, Latin America as a whole poses increased business environment risks versus the rest of the world, due to its still emerging status among its stronger global peers.

Wall Street's Take

Turning to Wall Street, MercadoLibre has a Strong Buy consensus rating, based on nine Buys, zero Holds, and zero Sells assigned in the past three months. At $1,998.89, the average MELI price target implies 18.8% upside potential.

Disclosure: At the time of publication, Nikolaos Sismanis did not have a position in any of the securities mentioned in this article.

Disclaimer: The information contained in this article represents the views and opinion of the writer only, and not the views or opinion of TipRanks or its affiliates, and should be considered for informational purposes only. TipRanks makes no warranties about the completeness, accuracy, or reliability of such information. Nothing in this article should be taken as a recommendation or solicitation to purchase or sell securities. Nothing in the article constitutes legal, professional, investment and/or financial advice and/or takes into account the specific needs and/or requirements of an individual, nor does any information in the article constitute a comprehensive or complete statement of the matters or subject discussed therein. TipRanks and its affiliates disclaim all liability or responsibility with respect to the content of the article, and any action taken upon the information in the article is at your own and sole risk. The link to this article does not constitute an endorsement or recommendation by TipRanks or its affiliates. Past performance is not indicative of future results, prices or performance.

MercadoLibre: Expanding E-Commerce Behemoth, with Risks Attached
 

Related Articles

UniCredit ups 2021 guidance after strong quarter
UniCredit ups 2021 guidance after strong quarter By Reuters - Oct 28, 2021

MILAN (Reuters) - Italy's second-biggest bank UniCredit raised its 2021 profit and revenue guidance on Thursday after reporting stronger than expected quarterly results thanks to...

Solvay raises FY cash flow outlook after Q3 beat
Solvay raises FY cash flow outlook after Q3 beat By Reuters - Oct 28, 2021

(Reuters) - Solvay (BR:SOLB) raised its full-year free cash flow guidance on Thursday after third-quarter results beat estimates supported by strong demand in the automotive,...

Add a Comment

Comment Guidelines

We encourage you to use comments to engage with other users, share your perspective and ask questions of authors and each other. However, in order to maintain the high level of discourse we’ve all come to value and expect, please keep the following criteria in mind:  

  •            Enrich the conversation, don’t trash it.

  •           Stay focused and on track. Only post material that’s relevant to the topic being discussed. 

  •           Be respectful. Even negative opinions can be framed positively and diplomatically. Avoid profanity, slander or personal attacks directed at an author or another user. Racism, sexism and other forms of discrimination will not be tolerated.

  • Use standard writing style. Include punctuation and upper and lower cases. Comments that are written in all caps and contain excessive use of symbols will be removed.
  • NOTE: Spam and/or promotional messages and comments containing links will be removed. Phone numbers, email addresses, links to personal or business websites, Skype/Telegram/WhatsApp etc. addresses (including links to groups) will also be removed; self-promotional material or business-related solicitations or PR (ie, contact me for signals/advice etc.), and/or any other comment that contains personal contact specifcs or advertising will be removed as well. In addition, any of the above-mentioned violations may result in suspension of your account.
  • Doxxing. We do not allow any sharing of private or personal contact or other information about any individual or organization. This will result in immediate suspension of the commentor and his or her account.
  • Don’t monopolize the conversation. We appreciate passion and conviction, but we also strongly believe in giving everyone a chance to air their point of view. Therefore, in addition to civil interaction, we expect commenters to offer their opinions succinctly and thoughtfully, but not so repeatedly that others are annoyed or offended. If we receive complaints about individuals who take over a thread or forum, we reserve the right to ban them from the site, without recourse.
  • Only English comments will be allowed.

Perpetrators of spam or abuse will be deleted from the site and prohibited from future registration at Investing.com’s discretion.

Write your thoughts here
 
Are you sure you want to delete this chart?
 
Post
Post also to:
 
Replace the attached chart with a new chart ?
1000
Your ability to comment is currently suspended due to negative user reports. Your status will be reviewed by our moderators.
Please wait a minute before you try to comment again.
Thanks for your comment. Please note that all comments are pending until approved by our moderators. It may therefore take some time before it appears on our website.
 
Are you sure you want to delete this chart?
 
Post
 
Replace the attached chart with a new chart ?
1000
Your ability to comment is currently suspended due to negative user reports. Your status will be reviewed by our moderators.
Please wait a minute before you try to comment again.
Add Chart to Comment
Confirm Block

Are you sure you want to block %USER_NAME%?

By doing so, you and %USER_NAME% will not be able to see any of each other's Investing.com's posts.

%USER_NAME% was successfully added to your Block List

Since you’ve just unblocked this person, you must wait 48 hours before renewing the block.

Report this comment

I feel that this comment is:

Comment flagged

Thank You!

Your report has been sent to our moderators for review
Disclaimer: Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. All CFDs (stocks, indexes, futures) and Forex prices are not provided by exchanges but rather by market makers, and so prices may not be accurate and may differ from the actual market price, meaning prices are indicative and not appropriate for trading purposes. Therefore Fusion Media doesn`t bear any responsibility for any trading losses you might incur as a result of using this data.

Fusion Media or anyone involved with Fusion Media will not accept any liability for loss or damage as a result of reliance on the information including data, quotes, charts and buy/sell signals contained within this website. Please be fully informed regarding the risks and costs associated with trading the financial markets, it is one of the riskiest investment forms possible.
Continue with Google
or
Sign up with Email