Gross profit (along with operating margin and net margins) has fallen over the years from a high of 80% in 2009 to a low of 37% in the 4th quarter of 2020 as they have invested in hiring, growing the business, and most costly of all establishing a fullfillment network (akin to Amazon’s). This fullfillment network will provide some “moat” for years to come. However,most recently, gross profit has ticked back up to 43% in the 1st quarter of 2021. – Wishyouwell
I have a 6.3% position in MELI yet I have not intensely analyzed the company (I merely see the LONG TERM performance of the company and have hitched a ride), so here is my brief opinion on whether it is a Saul-style company:
Yes and no…
Yes: They are developing a fintech arm of the company and that is rapidly growing and quite likely high margin… but, in the “no” column, it is technically not subscription. It is, however, quite sticky like most financial products. I note there are other companies here that are not subscription… can’t mention because I keep adding.
No: They are a lot like Amazon in some respects. Selling, taking delivery of product (with warehousing aspects that are capital intensive) and shipping/delivering it (also capital intensive)… and they are rapidly expanding their reach and local intensity of service. That’s NOT “Saul-like”. It’s “merely” Amazon like.
So, bottom line, this company isn’t likely to become a 80% margin subscription company. Just a plodding Amazon-like company with more fintech and no MGM. Writing this instead of standing in front of you keeps me from expressing the non-verbals of teasing here. Clearly, it is not a “Woe is us” situation to “merely” own an Amazon analogue.
See? No exhaustive analysis. (I’m about to go out for my daily walk).
Again, MELI is a bit over a 6% portfolio share. And, interestingly, it has kept pace with that share with the rest of my portfolio over the last couple years.
Also, I have a 16.4% allocation of SE. SE is sorta like Amazon (without prime and without an MGM) and sorta like MELI (but in SE Asia/not China)… but a huge chunk of the company is online video gaming (as opposed to just saying gaming and have you think “gambling”). That game portion is slowly diminishing as a proportion of the company because the shopping/fintech portion is growing so fast. Overall, solidly over 100% growth as well.
Extra credit: I also have a 5% allocation in GLBE, a seldom discussed company here that focuses on cross border shopping/shipping. Again, sort of like all the above except growing faster than any of them. Worthwhile for you to check out the prior discussion on this board regarding this company.
Summary: I think there is merit in owning these platforms. People (and companies) are interested in the convenience and ease of shopping and appreciate (becoming dependent on) their fintech. The hyper growth has been rewarding to date and I expect that to continue for the foreseeable future (at least the next decade).
Anyway, time to get dressed and walk my 4 miles through the soup of Charlotte humidity…
Rule Breaker Home Fool & STMP/MTH Maintenance Coverage Fool
He is no fool who gives what he cannot keep to gain what he cannot lose.