MercadoLibre stock is Wednesday's IBD 50 Growth Stocks To Watch pick as the e-commerce stock is in a cup-with-handle base, though the pattern has a flaw. The Latin American e-commerce company continues to impress investors with its robust profit and sales growth, and Wall Street expects the trend to continue.
The company often draws comparisons with Amazon.com. Its online shopping app operates in 18 countries and has more than 100 million unique active users.
MercadoLibre's largest markets are Brazil, Mexico and its birthplace of Argentina. It also offers Mercado Pago, a fintech business that includes a digital wallet popular in the region.
MercadoLibre Stock Nears Buy Point
The e-commerce stock is in an early stage cup-with-handle base with a 1,792.05 buy point, although the 14% handle is deeper than ideal. The stock also recently formed a bullish three-weeks-tight pattern within the handle, according to MarketSurge pattern recognition.
Shares gapped up more than 8% on May 3 in heavy volume, following the company's earnings report the prior day. Shares climbed before pulling back to form the current cup's handle in late May.
The stock reclaimed its 50-day moving average on July 5. MercadoLibre stock has climbed a modest 7% so far this year and lags Amazon stock's 30% increase.
Profit Growth Looks Bright
The e-commerce company beat first-quarter earnings and sales estimates on May 2. It saw notable growth in its Mexico and Brazil markets.
Quarterly profit grew 71% after several quarters of triple-digit growth in 2023. Second-quarter profit growth estimates call for a 67% increase on 35% sales growth. Meanwhile, sales growth has averaged nearly 40% over the last seven quarters. Future quarterly estimates call for continued robust growth for both earnings and revenue.
Analysts see full-year 2024 earnings growing of 78% to $34.72 per share and 35% to $46.82 in 2025, according to MarketSurge. This follows enormous growth over the last three years with earnings leaping from $1.67 a share in 2021 to $19.46 in 2023.
Mutual funds have added MercadoLibre stock, with 2,951 funds owning the stock in June, up from 2,938 in March. It holds an Accumulation/Distribution Rating of B, indicating institutions have been moderately buying the stock over the last 13 weeks.
The e-commerce stock has a respectable 92 IBD Composite Rating and 91 Relative Strength Rating. But its mediocre 55 Earnings Per Share Rating is weighed down by its loss from 2020.
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