Argentina-based e-commerce platform MercadoLibre (MELI) has emerged as a significant player in the e-commerce space. Founded in 1999 and now operating in 19 countries, MercadoLibre has now become Latin America’s largest online marketplace. MELI has also returned immense value to shareholders, with an eye-catching gain of 1,384% over the last 10 years.
The company’s diversified portfolio of products and services has strengthened its financials, as evidenced by Mercadolibre's recent third-quarter results. As the company continues to expand, its revenue and earnings could increase further.
MELI is up 87% year-to-date, outperforming the S&P 500’s ($SPX) gain of 18%. Let’s find out what Wall Street thinks about the company’s long-term prospects.
What Does MercadoLibre Do?
MercadoLibre is an online e-commerce marketplace operating in the Latin American region. Besides its e-commerce business, the company also runs Mercado Pago, its financial services platform that facilitates digital payments, credit, investment, insurance, and benefits management solutions. The company is often referred to as the “eBay of Latin America,” and in fact, eBay (EBAY) owned a stake in MELI until 2016.
The company's success can be attributed to its adaptability and innovation. Overcoming logistical hurdles, embracing diverse payment methods, and accommodating different cultural norms became integral to its growth strategy.
Furthermore, the company has consistently pushed the boundaries of innovation to meet evolving consumer expectations, from improving its user experience through mobile apps to investing in AI and machine learning for personalized recommendations.
Q3 Was A Blockbuster Quarter
MercadoLibre's deep understanding of the Latin American market has allowed it to gain a competitive advantage, propelling exponential revenue growth from $1.4 billion in 2018 to $10.5 billion in 2022.
In its recently concluded third quarter, total revenue of $3.76 billion increased a massive 69.1% year-over-year, surpassing consensus estimates by $209 million - thanks to outsized growth in Brazil and Mexico. Earnings per share (EPS) grew from $2.57 in the prior-year quarter to $7.18, beating the estimate by $1.48.
Additionally, thanks to its Mercado Pago platform, its total payment volume jumped 121.2% to $47.3 billion, while gross merchandise volume increased 59.3% to $11.4 billion during Q3. Fintech revenues jumped 33% year-over-year, while revenues from MELI’s advertising services also increased 70% from the prior-year quarter.
Since its blockbuster quarterly earnings release after the close on Nov. 1, MercadoLibre stock has surged 21%.
The Road Ahead For MercadoLibre
While the stock is reaching new 52-week highs, MercadoLibre still faces challenges. Amazon (AMZN), the global e-commerce giant, is posing stiff competition now that it has been rapidly expanding with AI integration. However, MercadoLibre has a strong foothold in Latin America, which should continue working in its favor.
To gain further advantage in logistics, the company opened a new regional fulfillment center in Brazil during the third quarter to meet its same-day shipping commitment. The company intends to open a second location in Pernambuco next year.
While MercadoLibre did not provide forecasts for the coming quarter or year, management stated that "we continue to invest across the business with confidence that the best is yet to come."
Meanwhile, for Q4, analysts forecast EPS growth of 132.6% to $7.56 per share on a revenue increase of 37% to $4.1 billion. For the full year 2023, analysts predict MELI’s revenue will grow 34% year-over-year to $14 billion, with earnings growth of around 138% to $22.69.
What Are Analysts Saying About MELI?
Overall, Wall Street rates MELI as a “strong buy.” Of the 12 analysts covering MELI, 10 have a “strong buy” recommendation, while two suggest a “hold.”
The stock is trading very close to analysts’ average price target of $1,696.15, representing a potential upside of about 7% from current levels. However, MELI has a high target price of $2,180, which implies an upside potential of about 37% by the end of 2024.
MELI stock trades at 50 times forward earnings, which appears a tad expensive. However, its growing revenue and earnings in a rapidly expanding market justify its valuation. Analysts predict that revenue and earnings will increase by 23% and 40% year-over-year, respectively, in 2024.
The Key Takeaway for MELI Stock
MercadoLibre's journey from a small online marketplace to a tech giant represents the potential for growth and innovation in emerging markets.
According to Statista, the global e-commerce market could be worth $5 trillion by 2028. With the e-commerce market expanding at a rapid pace in a new AI era, MELI's growth trend is likely to continue in the coming years.
Despite the outsized gains this year, MELI stock is down 20% from its 2021 highs. It presents a good buy-at-dip opportunity for growth-oriented investors who believe MercadoLibre has more room to expand in the e-commerce market.
On the date of publication, Sushree Mohanty did not have (either directly or indirectly) positions in any of the securities mentioned in this article. All information and data in this article is solely for informational purposes. For more information please view the Barchart Disclosure Policy here.
