Stanley Druckenmiller's Latest Bet: MELI—Should You Follow Suit?

Key Points

• Druckenmiller's recent 13-F filings reveal a new $60 million investment in MercadoLibre (MELI), a leading e-commerce platform in Latin America.
• MELI has experienced a significant surge, with its stock rising nearly 27% year-to-date and 63% over the past year, indicating strong growth momentum.
• MELI continues to show strong financial performance, with double-digit growth across key metrics and an improving balance sheet, making it a potentially undervalued growth stock.

Stanley Druckenmiller, a renowned investor with a stellar track record, has made headlines with his family office, Duquesne, selling its position in NVIDIA NASDAQ: NVDA after accurately predicting the AI boom and NVDA's subsequent surge. Druckenmiller first invested in NVIDIA in the fourth quarter of 2022, showcasing his keen market insight. He attributes his success not to intelligence but to disciplined investing, a principle that has served him well.

His recent market moves are closely watched, and thanks to regulatory filings, investors can gain insights into his strategy. Investment funds managing over $100 million must report their portfolio changes to the SEC quarterly through 13-F filings, which are backdated to the end of the previous quarter. Among Druckenmiller's new positions is MercadoLibre, Inc. NASDAQ: MELI, where he has invested nearly $60 million. Given his successful call on NVDA, should investors consider following his lead with MELI?

MercadoLibre: A Leader in Latin American E-Commerce

MercadoLibre, Inc. is a dominant force in Latin America's e-commerce sector, connecting millions of buyers and sellers across 18 countries. The company aims to democratize commerce and financial services, making online transactions accessible and efficient. MercadoLibre's core business is its online marketplace, offering various products and services, from electronics to fashion and vehicles. Additionally, the company provides digital payments, credit, and insurance, targeting the rapidly growing and underserved middle class in Latin America. This focus on individual consumers and small-to-medium-sized businesses positions MercadoLibre as a critical player in the region's economic development.

Positive Sentiment and Performance

MercadoLibre is highly regarded among analysts, with a consensus Buy rating based on thirteen ratings. Despite a remarkable year-to-date surge of nearly 27% and a 63% increase over the past year, pushing its market cap to $101 billion, the stock is still seen as having room to grow. On August 8th, Goldman Sachs raised its price target to a street-high $2,480, reflecting continued optimism.

The company is in a robust growth phase, evidenced by its high P/E ratio of 89 and a forward P/E of 60. MercadoLibre's net margins stand at 8.03%, with a pretax margin of 10.87%. The company has demonstrated impressive revenue and earnings growth, most recently reporting earnings data on August 1st, 2024. MercadoLibre posted an EPS of $10.48 for the quarter, surpassing the consensus estimate of $8.53 by $1.95. Revenue for the quarter was $5.07 billion, beating the consensus estimate of $4.64 billion and marking a 41.5% year-over-year increase.

Its impressive revenue growth was driven by solid performances in both commerce and fintech sectors, with revenues increasing by 53.4% and 27.5%, respectively. Additionally, MELI's advertising services revenue grew by 51% year-over-year, accounting for nearly 2% of the company's gross merchandise volume (GMV) at the end of the second quarter.

MercadoLibre also benefited from increasing total payments volume (TPV), bolstered by the robust performance of Mercado Pago. The company's rising GMV, particularly in key markets like Brazil and Mexico, further contributed to these strong results.

Additionally, MercadoLibre has significantly strengthened its financial position over the last four quarters. This improved balance sheet reflects the management's disciplined approach to capital allocation and focus on enhancing financial flexibility, strongly indicating the company's long-term stability and growth potential.

The Bottom Line

MercadoLibre appears to be a compelling investment, backed by its strong operational and financial performance, with double-digit growth across many key metrics. Despite its recent surge, the stock might remain undervalued from a growth perspective, and the company's rapidly improving balance sheet only adds to its appeal. MercadoLibre might be a unique option to explore further for investors who are firmly focused on growth stocks.