Nothing Seems To Be Stopping MercadoLibre

| About: MercadoLibre, Inc. (MELI)
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According to the 2014 edition of the Latin America 500 by Internet Retailer, Latin America was the second fastest growing e-commerce market in the world. The report estimates that sales of more than 500 web merchants in the region have grown 23% in 2013 to $17.94 billion. The growth was dominated by Brazil due to high Internet penetration rates and a rapidly growing mobile device market. Brazil accounted for nearly 45% of the market with $11.7 billion in e-commerce sales.

MercadoLibre’s Financials

MercadoLibre’s (NASDAQ:MELI) third quarter revenues grew 20% over the year to $147.9 million. EPS of $0.66 grew 12% over the year. EPS of $0.76 grew over previous year’s $0.66 and also surpassed market expectations of $0.65.

During the quarter, MercadoLibre’s items sold improved 22% to 26.9 million. Total Gross merchandise volume of the sales increased 79% in local currency, but fell 10% in USD to $1,682.7 million. The negative impact on currency was due to the fluctuation in the Venezuelan currency. Total payment transactions through MercadoPago grew 49% to 12.5 million with total payment volume growing 52% in USD to $975.1 million.

MercadoLibre’s Expansion
According to researchers, e-commerce in Latin America accounts for less than 3% of total retail sales in the region and is expected to double by 2018. MercadoLibre is hoping to address this market by following their three pronged strategic approach. To facilitate e-commerce, they have been pushing their payments and shipping solutions.

They have recently released a new interest-free credit offering in their biggest market of Brazil. The service provides goods at zero-interest installments to buyers and the financing charge is covered by sellers who pay a higher marketplace fee to use the service. The seller, in return, benefits from being able to deliver additional sales generated by these listings. The move has helped improve metrics, and they are seeing MercadoPago, their payment platform, being used in more than 70% of marketplace transactions in the country.

As part of their shipping solution, MercadoLibre is offering MercadoEnvios exclusively through MercadoPago. More than 30% of units sold in Brazil are being shipped through MercadoEnvios. It is not just Brazil, other markets such as Argentina are also reporting strong growth.

Additionally, they are improving their verticalized offerings by creating specialized formats for big volume sellers of different verticals. They have been developing storefronts for branded retail products under the Mall initiative. The move has helped their platform attract large retailers. During the quarter, they opened official stores for RicardoEletro, which is the largest electronics retailer in Brazil and for Walmart in Argentina.

Finally, they are investing in improving customer support services by growing online contact channels to reduce wait times, shorten queues, and improve dispute management.

The market is pleased with their efforts and the stock hit an 11-month high of $144.23 soon after the results announcement. It is currently trading at $135.51 with a market capitalization of $5.98 billion.