Latin America-focused e-commerce company MercadoLibre is the IBD Stock of the Day for Wednesday. Coming off a strong second-quarter earnings performance, shares are pushing above a cup-with-handle buy point.
MercadoLibre is often called the Amazon.com of Latin America. But it also is a leading fintech company for the region, offering a popular Venmo-like digital wallet, among other services. The firm celebrated 25 years in business Friday. The company operates in 18 countries. Its shares debuted on the Nasdaq in 2007, priced at 18. MercadoLibre stock now has a market cap just under $95 billion.
MercadoLibre stock soared 10% on Friday, Aug. 2, after the company reported stronger-than-expected third quarter results. The gains placed MercadoLibre as Latin America's most valuable company by market cap, surpassing oil giant Petrobras. Founder Marcos Galperin celebrated the milestone in a post on X, formerly Twitter, Friday. "It had to be done ... and we did it," Galperin wrote.
MercadoLibre Q2 Earnings Cruise Past Views
MercadoLibre earned $10.48 per share on revenue of $5.1 billion for the June quarter, according to results published late Thursday, Aug. 1. Analysts expected EPS of $8.53 on revenue of $4.7 billion, according to FactSet. The company reported net income of $531 million, up sharply from $262 million in the year-earlier quarter.
The results highlighted the company's dual fast-growing businesses. Its e-commerce focused MercadoLibre platform handled gross merchandise value of $12.6 billion for the quarter, up 20% year over year. Meanwhile, the firm's Mercado Pago financial services arm processed $46.3 billion in payments, up 36% year over year.
"MercadoLibre reported strong Q2 numbers across the board," New Street Research analyst Soomit Datta wrote to clients following the report.
Datta noted that gross merchandise value in Brazil accelerated to 36% growth in local currency, from 30% year-over-year growth in Q1.
"Expectations had been for a slowdown (normalization), implying still very strong share gains in this key business," Datta wrote.
MercadoLibre also saw strong growth in Mexico, with gross merchandise value up 30%.
An ongoing battle with extreme inflation in Argentina is weighing on MercadoLibre's performance in the country where it was founded. But the company noted that the second quarter marked a return to year-over-year growth for total items sold in Argentina.
MercadoLibre Stock Near Top Of E-Commerce Category
After surging 86% in 2023, shares of MercadoLibre are ahead 20% so far this year, outpacing an 11.6% gain for the S&P 500.
On the stock market today, MercadoLibre stock is up 3% in recent action at 1,867.68. Shares are hovering above a 1,792.05 buy point from a cup-with-handle base.
MercadoLibre stock initially broke past its cup-with-handle buy point on Monday, according to MarketSurge charts. But shares closed the day lower amid a broad market sell-off. Shares pushed back above the buy point with a 2% gain Tuesday. However, investors should be cautious with the market in correction.
Meanwhile, MercadoLibre ranks No. 2 among 60 stocks in the IBD Retail-Internet industry group. It trails only PDD Holdings, the China-based parent company of Temu. Amazon ranks ninth, following the U.S. e-commerce giant's Q2 earnings letdown.
MercadoLibre stock has an IBD Composite Rating of 98 out of 99, according to IBD Stock Checkup. The score means MELI stock currently tops 98% of stocks in key metrics and technical strength.
Beyond that, the company's Relative Strength score of 87 indicates it is outperforming 87% of stocks based on price growth.
A strong run of earnings growth gives MercadoLibre an EPS Rating of 99.
MercadoLibre is on the IBD 50 and IBD Tech Leaders lists.
