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Mercardo Libre has a Highly Attractive Risk-Reward Skew, Says Morgan Stanley

Stock Markets Jun 24, 2022 04:04PM ET
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© Reuters. Mercardolibre has a Highly Attractive Risk-Reward Skew, Says Morgan Stanley

By Sam Boughedda

Mercado Libre (NASDAQ:MELI) was reiterated with an Overweight rating and price target of $1,690 by Morgan Stanley Andrew Ruben on Friday.

Morgan Stanley analysts met with Mercado Libre management and said they came away from meetings seeing growth and monetization drivers for the company at a disconnect versus what's priced in.

"Macro pressures persist, but we see this being outweighed by company-specific drivers such as eCommerce share gain, ads/logistics uptake, and Fintech pricing," said Ruben.

The analyst said the company continues a balanced approach across growth, market share, and profitability. However, its tech headcount remains in focus, and they see other areas where the pace of spending could slow.

However, "MELI's over-arching message remains consistent, with the company targeting modest incremental profit growth on a y/y basis going forward."

"We see product & tech development remaining a key spending focus for MELI, consistent with the company's plan to hire 4,000 developers in 2022 (reaching 12,000). Conversely, amid a difficult backdrop for electronics sales, we see a path to lower investments around 1P merchandise, which have been a drag on gross margins," continued the analyst.

"With our '21-'23E algorithm for GMV (in USD) at a +23% CAGR, revenue +39%, and EBITDA +73%, we see a disconnect between fundamental trends and MELI's share price – at 17.5x' 23E EBITDA, we see a highly attractive risk-reward skew and reiterate OW."

Mercardo Libre has a Highly Attractive Risk-Reward Skew, Says Morgan Stanley
 

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Comments (1)
Paulo Russomanno
Paulo Russomanno Jul 11, 2022 2:01PM ET
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You got to be kidding.....!!!! Argentina is falling apart. brazil (55% of sales) has an inflation of 12%, making the Central bank to raise interest rates up to 13.25 and still raising next two meetings, Mexico also in trouble. All tree are 955 of sales. To have a price target of $1,690 and overweight recommendation....I wonder if they are talking about 2027.....??? By the way competition is not only getting tougher but also suffering a lot, some stock prices of local companies went down 80%
 
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