Get Your International Exposure With Mercado Libre (NASDAQ:MELI)

Mercado Libre Is More Than Just A Play On EM

If you are interested in some foreign exposure and a way to ride out trends sparked by COVID look no further than Mercado Libre (NASDAQ:MELI). Mercado Libre is Latin America’s largest eCommerce portal and one that is growing by leaps and bounds. To understand the business, think of like a mix of eBay, Alibaba, Shopify, and Paypal with a dose of Amazon and Facebook thrown in. Not only do you get exposure to EM and Latin America but you get exposure to some of the strongest trends in the market today. The company is growing organically and by acquisition with the latest foray into fintech. The takeaway for investors is Mercado Libre is a fast-growing, well-established business in a largely untapped market.

Pedro Arnt, Chief Financial Officer of MercadoLibre, Inc., commented, “We are proud to announce MercadoLibre’s third-quarter results, recording another strong quarter, driven by high demand for e-commerce and fintech services. During these last three months we’ve begun to consolidate our leadership position both for mid and long tail segments and started to strive for the higher segments of the merchant pyramid … The opportunity ahead of us is sizable, and we feel increasingly confident that we can capitalize on it.”

 Mercado Libre Smashes Estimates, Shares Surge

Mercado Libre saw robust growth across all segments on both an actual and an FX-neutral basis. Starting at the top-line, gross consolidated revenue grew 90.7% YOY to $1.15 billion. The revenue beat the consensus by $165.25 million or 17% revealing the underlying strength of both the business model and economic conditions in Latin America. Gross Merchandise Volume, the total value of goods exchanged across the network grew 117.1% while the Total Payment Volume expanded 161.2%.

On a user basis, the number of unique monthly grew more than 90% over the course of the year. The total number of users topped 76 million but is still just a drop in the bucket for this company. For comparison, Amazon has more than 200 million active monthly users worldwide; there are an estimated 650 million people living in Latin America today. That’s a lot of room for growth. Some of the stats of interest include a 110% increase in the number of units sold, a 22.3% jump in the number of listing, a 283.8% increase in mobile users, a 131% surge in the # items of shipped, and a 203% increase in the payments volume.

The Analysts Are Bullish, But Not Bullish Enough

The analysts are bullish on this stock. Of the 24 active ratings, 16 are bullish and 10 of those overweight or outperform. On a consensus basis, however, they are not bullish enough. The consensus target is about 10% below recent price action suggesting that either the market has things wrong or the analysts do. More recently, there has been a string of upgrades and price target updates that puts price closer to $1500. Based on the 3Q results I expect that trend to continue.

The Technical Outlook: Mercado Libre Is Going Parabolic For A Reason

Shares of Mercado Libre added another 10% to a move that has gone parabolic. The reason is simple, what was a fast-growing company has seen such a surge in business because of the virus it’s in a whole new league. Because eCommerce is the future of business the gains seen this year are expected to stick and grow more in the coming quarter and years.

Looking at the weekly chart, the post-earnings release surge in price action has shares trading at a new all-time high. The break to new highs confirms a consolidation that could easily lead to double-digit gains within the next 12 months. Looking at the indicators, both stochastic and MACD confirm the break to new highs with bullish crossovers and there is still plenty of room for upside movement. You may not want to buy Mercado Libre today, a little pullback in prices would be nice, but you definitely want to buy Mercado Libre.