MercardoLibre (NASDAQ:MELI) shares were sharply higher Wednesday after four firms launched coverage of the Latin American e-commerce company, which is basically an eBay (NASDAQ:EBAY) clone. The company went public August 10 at $18 a share, and immediately vaulted higher.
Three of the four firms that lead the underwriting group issued bullish notes Wednesday, including Merrill Lynch, J.P. Morgan and Pacific Crest. Nothing yet from the fourth major player in the deal, RBC Capital. But there was a fourth report, perhaps the most upbeat of them all, from American Technology Research.
Here is a quick rundown on their calls:
- Merrill Lynch analyst Robert Ford started the stock with a Buy rating and $35 price target. Ford writes that his target “assumes a 46x multiple of 2009E EPS, and provides for contraction from MELI’s current P/E of 57x 2008E EPS.” He says his 5-year EPS CAGR, calculated off a 2006 base year, “is well over 100%, a rate which exceeds all other names in our valuation peer group, and which we believe affords room for surprise.”
- J.P. Morgan’s Imran Khan starts with an Overweight rating. He says the stock should outperform, driven by strong e-commerce trends in Latin America, “take rate improvements,” growth in MercadoPago, its online payment service, and advertising revenue growth.
- Pacific Crest’s Steve Weintstein starts the company with an Outperform rating and a $38 target. “Although e-commerce is still modest in Latin America, we expect the company to be a major beneficiary of strong secular trends that should drive e-commerce growth of 40%-plus over the next several years,” he writes.
- American Technology Research’s Tim Boyd launched with a buy rating and $45 target, citing the potential for e-commerce in Latin America. “Latin America has a higher Internet penetration rate than Asia, but is growing at a faster pace,” he writes. “This is not a ‘we’ll make money one of these days’ growth [story]. The profitability inflection point has already been hit, and the numbers are rising rapidly.”