MercadoLibre Continues To Deliver Strong Growth

| About: MercadoLibre, Inc. (MELI)

According to research by Visa, e-commerce sales in Latin America are projected to be more than $69 billion this year. Sales are projected to grow to more than $100 billion by the end of the next year. Latin America is the fifth largest e-commerce market in the world.

MercadoLibre's Financials

MercadoLibre (NASDAQ:MELI) saw Q3 revenues grow 27% over the year to $123.1 million. EPS of $0.66 grew 12% over the year. The market was looking for an EPS of $0.73.

Among other operating metrics, gross merchandise volume grew 31% to $1.9 billion, and total payments volume grew 34% to $641.6 million. Items sold on the site grew 25% to 22 million, and total payments transactions processed through MercadoPago grew 32% to 8.4 million.

MercadoLibre's Growth Strategy

MercadoLibre remains focused on expanding the mix of products on its platform. The company continues to verticalize their offerings and are seeing growth in segments other than fashion and apparel. Recently, it opened its platform to enable integration with multiple brands including names like Quiksilver and Diesel in apparel and Phillips in consumer electronics. Besides improving its product offering in selected verticals, MercadoLibre is also expanding its mobile solutions to make it the preferred method of shopping by consumers.

Earlier this quarter, the company announced a strategic tie-up with ChannelAdvisor (NYSE:ECOM) to improve its marketplace offerings. ChannelAdvisor provides services to help retailers sell their products online by helping them place the products with online marketplaces such as Amazon (NASDAQ:AMZN) and eBay (NASDAQ:EBAY) and through comparison shopping engines and search engine ads. Through the tie-up, ChannelAdvisor will provide companies wanting to sell on MercadoLibre's marketplaces services with solutions to help with automating product feeds, inventory and product listings, improving sales and handling post-sale customer service. The move will help MercadoLibre become a more attractive sales platform for other retailers.

MercadoLibre is investing heavily in R&D efforts, which also caused it to miss earnings expectations. During the last quarter, MercadoLibre's R&D expenses grew 51% over the year to $12.07 million. Earlier this year, the company also acquired a software development factory in Argentina, which not only helped to expand its presence in the country, but also improved the strength of its engineering teams.

MercadoLibre's stock is trading at $106.08 with a market capitalization of $4.68 billion. It touched a 52-week high of $145.99 in October 2013.

A recent comScore report on the growth in internet unique visitors pegged Latin America's growth at 13% year over year. This was the fastest growth reported by any continent. The Latin American e-commerce market is booming to cater to the upcoming Internet population. E-tail giants like Amazon and eBay have both entered in Brazil, albeit at a very limited capacity. Recently Japan's e-commerce site, Rakuten (OTCPK:RKUNF), also began building their small scale marketplace offerings. Berlin-based Rocket Internet backed Linio recently received $50 million in funding for investment in e-commerce in the region. For now, though, MercadoLibre remains focused on ensuring that it keeps cashing in on its first-mover advantage.