MercadoLibre Targets Double-Digit Upside with Argentina Boom

Key Points

• MercadoLibre is giving investors another reason to look at the stock, offering a potential double-digit upside.
• Recent financial data shows aggressive growth across all the company's key performance indicators, with more to come.
• A new report shows that more growth will probably deliver an earnings beat stemming from Argentina's breakout.

While the world of e-commerce in the United States and Europe is dominated by Amazon.com Inc. NASDAQ: AMZN and arguably shared with Chinese giant Alibaba Group NYSE: BABA, a new Latin American territory has been taken over by the region’s leading platform instead, with a particular interest in Argentina’s new breakout.

MercadoLibre Inc. NASDAQ: MELI dominates most of Latin American e-commerce demand. While developing economies like Brazil and Colombia don’t have the type of swings that could be seen elsewhere, Argentina’s new administration through Javier Milei offers a new wave of above-average growth for investors to take advantage of with the right exposure.

This exposure might be found in shares of MercadoLibre, as the company recently announced satisfying new data coming out of their Argentinian division, showing that new consumer discretionary trends are overtaking the previous demand once primarily focused on consumer staples products instead. What follows could be a double-digit upside in the stock, a fact that Wall Street has gotten behind recently.

The Key Drivers Fueling Bullish Sentiment for MercadoLibre Stock

Starting with the simplest and most obvious gauge, price action, MercadoLibre now trades at 96% of its 52-week high, showing investors bullish momentum in favor of the company and its recent developments. However, the reason to consider taking a second look at this company goes beyond the stock price.

Investors can gain further insights by checking with Wall Street and assessing how analysts feel about MercadoLibre stock to justify the recent price action. Valuations and price targets are a good place to start, and the consensus is now set at $2,246, calling for a net upside of just under 10% from today's price.

However, there are those willing to stand out from the pack and give this stock a higher perceived valuation. Those at Cantor Fitzgerald now see MercadoLibre stock going as high as $2,530 for a net potential upside of as much as 23.6% from today's price, not to mention a new 52-week high to keep the momentum going until the year's end.

Future prospects and recent momentum for MercadoLibre stock have helped convince institutional buyers to consider allocating capital to the stock. As of August 2024, Legal & General and the Canada Pension Plan Investment Board have boosted their holdings in MercadoLibre stock by a respective 3.6% and 12.1%.

These recent additions brought their investments up to $531.8 and $424.75 million each as of today, showing investors further bullish sentiment coming from other Wall Street participants. This is something to keep in mind moving forward, as well as other recent catalysts.

MercadoLibre's Earnings Are Strong and Point to Even Greater Growth

As of the most recent quarterly earnings results for MercadoLibre, investors can note a few of the key performance indicators (KPIs) in the company in the latest press release. Starting with revenues, the company reported $5.1 billion, a significant 42% jump over the past 12 months.

This rise is driven by a 20% bump in gross merchandise volume, which reached a high of $12.6 billion. Monthly active users are the engine of these growth figures. MercadoLibre saw 52 million users this quarter compared to only 38 million for the same quarter last year.

Out of all the regions in Latin America that MercadoLibre operates in, Argentina seemed to be the strongest one, reporting up to 252% annual growth in gross merchandise volume to lead significantly above other comparable segments like Brazil and Mexico.

Despite already delivering strong quarterly numbers, the company's Argentina segment is leaving investors with fresh evidence from the country. According to this Bloomberg report, MercadoLibre's Argentina business saw a record 20 million products sold.

This record volume represented up to $916 million worth of commerce, but the type of products sold gives investors an additional—and arguably more important—trend to consider for the next quarter. These products were consumer electronics like laptops and cell phones, driving away market share from necessary products like food.

Expecting to see MercadoLibre stock outperform some of its peers in the retail sector, markets are now willing to overpay for exposure to the company's future earnings, as investors can see from the stock's price-to-book (P/B) ratio today. While the retail sector's average valuation is 4.8x P/B, MercadoLibre trades at a significant premium of 33.7x today.