In an earlier thread, dorset96 asked “Is it time to consider Mercado Libre?”
Several significant highlights were:
Net Revenues of $1,115.7 million, up 148.5% year-over-year on an FX neutral basis
$14.5 billion Total Payment Volume, up 161.2% year-over-year on an FX neutral basis
$5.9 billion Gross Merchandise Volume, up 117.1% year-over-year on an FX neutral basis
https://discussion.fool.com/is-it-time-to-consider-mercado-libre…
I bought a small position in 2008 that has been one of my most successful buys ever, but I didn’t add to that because in subsequent years, it looked “expensive” and analysts were not predicting significant price increases. That was a big mistake.
But over time, I’ve learned more about evaluating high growth companies, especially from reading this board. For several years, I would look at MELI’s price and think “I should have bought more last year.”
In October, I looked at the numbers and decided to use some of my FSLY sales money to buy more MELI.
The November earnings results (highlights above) reinforces that decision, and I may buy more (cash from LVGO/TDOC merger).
For more information, there is a good Seeking Alpha article by Andres Cardenal.
https://seekingalpha.com/article/4385284-mercadolibre-is-on-…
Summary
MercadoLibre is delivering accelerating growth and record performance in both the e-commerce and fintech segments.
The company is broadening its competitive moat via the network effect and higher logistics penetration.
Shipping is expensive, but overall margins are still moving in the right direction.
The market is expecting vigorous growth going forward, but the stock is not unreasonably valued.
MercadoLibre enjoys enormous opportunities for growth and management is doing a solid job of capitalizing on such opportunities.
The article notes that the pandemic tailwinds that had already led to a 130% YoY growth had been acknowledged by the market leading up to the Q3 report, which still outperformed and surpassed both earnings and sales expectations.
In addition to the highlights noted by dorset96
Fintech revenues increased by 52.3% year-over-year in USD to $391.2 million.
Mobile wallet delivered $3.2 billion in transactions, an increase of 380.5% year-over-year on an FX neutral basis.
Significantly, the mobile wallet consumer base grew by 125.2% compared to the third quarter of 2019, reaching 13.7 million unique payers.
The mobile wallet increase bodes well for the future as it should continue to see growth due to both the pandemic and changing habits of consumers. (A few years ago, it occurred to me that at some point in the near future, young people seeing me swipe a credit card to pay for something might view me in the quaint way I used to watch my grandparents’ generation sort through their small change purse to pay with exact change).
Mobile wallets are yet another area that should continue to accelerate due to the pandemic, even if not as rapidly as some other areas. Why risk letting someone spread germs to your credit card or touching a dirty screen when you can just wave your watch or phone in front of a scanner?
Shipping operation costs increased as a percentage of revenue, which decreased gross profit margins to 43% from 47.2% in Q3 of 2019, but operating expenses as a percentage of revenue declined to 35.6% versus 60.7%. which moved the net income margin in the right direction (from -24.2% to 1.3%).
The author sees the revenue growth and expanding profit margins producing a boost to earnings per share.
MELI’s network effect with e-commerce and fintech should continue to attract both buyers and sellers because they offer leading platforms for both fields, plus they are expanding their logistics network. I have watched MELI since 2008, and they continue to grow, to expand their markets, to innovate, and remain a leader. Again, if I had had the knowledge base gained from this board, I would have added more to my position over the years. I have recently added more, and see the network effect as significant.
MELI has a significant untapped market. The article estimates that this year 10.8 million consumers will make a digital purchase for the first time leading to 191.7 million digital buyers which is still only 38.4% of the region’s population ages 14 and older.
E-commerce still represents only 5.6% of $83.63 Billion in retail sales in the region, and it is estimated to grow to 7.1% of an estimated $115.23B in retail sales by 2023. That’s a growth from ~$4.68B to ~$8.25B or a 76% growth.
For Fintech, the bankarized percentage of population in Latin America (ranging from 29% to 68%) is much lower than in the U.S. and Canada, (94% - 99%). Credit card usage ranges from 10% - 28% versus 57% - 73%
I see much potential for MELI. There should be some volatility, but the numbers should continue to impress.
All the best,
Raymond