Entering text into the input field will update the search result below

MercadoLibre: Strong Execution And Massive Potential Ahead


  • The recent numbers from MercadoLibre show that the company keeps executing well and delivering solid performance in a challenging economy.
  • MercadoLibre has enormous room for sustained growth and further appreciation in the years ahead.
  • Currency risk is a major risk factor, and investments for growth are hurting profit margins.
  • Nevertheless, for investors who can handle the volatility, MercadoLibre is an exceptional growth opportunity.
  • Looking for a portfolio of ideas like this one? Members of The Data Driven Investor get exclusive access to our model portfolio. Get started today »

MercadoLibre (NASDAQ:MELI) reported earnings for the third first quarter of 2020 on Tuesday, May 5, and the numbers were clearly outstanding. The company outperformed expectations, and the main indicators in both e-commerce and fintech look clearly healthy. Importantly, MercadoLibre still has enormous potential for growth going forward, and the bullish thesis for the stock looks stronger than ever.

MercadoLibre Keeps Firing On All Cylinders

No company is immune to the global recession produced by the COVID-19 pandemic, but the online commerce and fintech leader in Latin America is clearly sailing through the storm well.

Management said in the conference call that MercadoLibre was seeing strong demand in the first quarter of 2020 until the business started feeling the impact of the lockdowns in March, especially in big markets such as Brazil and Argentina. However, demand was already rebounding in April.

The company also experienced some shifts in demand trends, with categories such as health, consumer packaged goods, and toys and games performing strongly while non-essential categories saw marked declines in growth rates.

In the fintech segment, the company observed a deceleration in volume payments processed by mid-March, mostly due to lower foot traffic in brick and mortar retailers that use MercadoLibre's MPOS and QR solutions. The negative impact was partially offset by strength in areas such as online payments merchant services, online wallet use cases, and convenience store merchants.

By the end of the quarter, the nonperforming loan ratios in the fintech segment had not shown any deterioration due to the crisis, but the company still slowed credit originations to both merchants and consumers to reduce risk exposure in an uncertain context.

In order to secure liquidity, the company is drawing on credit facilities at a local subsidiary level, and the consolidated balance sheet currently holds approximately $2.3 billion in cash and liquid

A subscription to The Data Driven Investor provides you with solid strategies to analyze the market environment, control portfolio risk, and select the best stocks and ETFs based on hard data. Our portfolios have outperformed the market by a considerable margin over time, and The Data Driven Investor has an average rating of 4.9 stars out of 5. Click here to get your free trial now. You have nothing to lose and a lot to win!

Performance as of May 6, 2020

This article was written by

Andres Cardenal, CFA profile picture

Andres Cardenal, CFA, is an economist with 20 years working in investment research and strategy development for hedge funds, family offices and asset managers in the U.S. and Latin America.

He leads the investing group The Data Driven Investor, where he offers evidence-based analysis on Growth Stocks, Options Ideas for short-term consistent income generation, Macro analysis, Quant Portfolios for momentum and dividend investors and ETF strategies. The service features an active chat room and an engaged community of serious investors. Learn More.

Analyst’s Disclosure: I am/we are long MELI, AMZN. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

Seeking Alpha's Disclosure: Past performance is no guarantee of future results. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. Any views or opinions expressed above may not reflect those of Seeking Alpha as a whole. Seeking Alpha is not a licensed securities dealer, broker or US investment adviser or investment bank. Our analysts are third party authors that include both professional investors and individual investors who may not be licensed or certified by any institute or regulatory body.

Recommended For You

Comments (11)

Fairly certain market cap is ~60 bil....
I bought in on Mercadolibre yesterday on the strength of recent e-commerce earnings. Do you see Meli having a similar blow out quarterly report this upcoming week?
07 May 2020
Andres - do you reckon it's too late to buy now?
Andres Cardenal, CFA profile picture
It is not too late to buy if you have a long term horizon, and the stock will pull back sooner or later. For those who don't own the stock, I would start with a very small position at these prices and look to buy more on a pullback.
Michael W Byrne profile picture
Nice analysis. Good point about the market cap still only being a fraction of that of both Alibaba and Amazon. I had owned this one quite a while ago and sold at a decent profit, but have been kicking myself as it turned out to be way too early! I recently bought in at a much higher price than my initial investment because it looks like the market still has plenty of potential.

I wonder if at some point they will consider a split if the price keeps rising
Great write-up, @Andres Cardenal, CFA . I've been in and out of MELI since around $30, and this stock keeps on surprising me, don't really need to point out the alpha it has generated. I've taken a larger position when Goldman Sachs invested in MELI, but sold prior to the pandemic and re-entered slightly after the recent lows. I'm now determined to hold despite the high volatility the stock has. I would agree that the stock has a great future, and there is a reason why Goldman is backing their payment solution.
I live in Ecuador and sell electronics online. Between 95% of all sales are now done on Facebook's Marketplace. I don't even bother to put my items on Mercado Libre anymore. This company is going down.
Hi, could you explain more? thanks !
That's puzzling since the numbers indicate that the majority is choosing MELI.
I'm itching to sell but took a deep breath walked away from PC for awhile.
@Andres Cardenal, CFA Thank you for your article on MercadoLibre. The stock has handed us some nice profits over the years and continues to stay dominant as an Latin America e-commerce play despite the current pandemic! With a new 52-week high today, MELI continues to shine. Have you heard any new analyst 12-mo price targets?
Disagree with this article? Submit your own. To report a factual error in this article, . Your feedback matters to us!

About MELI

SymbolLast Price% Chg
Market Cap
Yield (TTM)
Rev Growth (YoY)
Short Interest
Prev. Close
Compare to Peers

More on MELI

Related Stocks

SymbolLast Price% Chg
To ensure this doesn’t happen in the future, please enable Javascript and cookies in your browser.
Is this happening to you frequently? Please report it on our feedback forum.
If you have an ad-blocker enabled you may be blocked from proceeding. Please disable your ad-blocker and refresh.