MELI was down 19.5% last year and down 33% this year too. The drops have been due to concerns about credit quality with MELI’s credit facility and concerns about SEA Ltd. encroaching on the Brazilian e-commerce market (MELI largest market). I believe that the logistics and payment moats that MELI built are too difficult for SEA Ltd. to overcome, but I was concerned about deteriorating credit quality, so I reduced my holdings from 14% to 5%.
Today’s earnings report addressed those concerns, somewhat.
Revenues grew 61% YOY, at $2.1B which was slightly ahead of consensus estimates at 2.0B.
e-commerce “market share grew, even with Asian players.” according to Andre Chaves, SVP Brazilian Operations, though no firm market share numbers were released.
Mercado Pago electronic payment volume was up 72.8% to $24.2B
CFO Pedro Arnt said “nonperforming loans dropped”, but didn’t disclose specific numbers.
Mercado Credito loan portfolio grew to $1.7B, a 300% YOY gain.
Moves to crypto currencies are gaining popularity in Latin America.
Net loss per share increased to $0.92 from $0.73.
Gross profit margin increased to 40% compared to 36.8% a year ago.
It’s more good than bad. The crypto currency moves are giving me some pause, but I think MELI is making the correct business decisions. I will probably increase my shares from 5% to 6 or 7%, but not increase my allocation to previous highs.
This is from the conference call:
“We are managing the default risk levels in our credit book very closely, and observed sequential improvements in non-performing loans during the fourth quarter. Total non-performing loans as a percentage of our outstanding portfolio have improved from 28% in the third quarter to 24%, and the allowance for uncollectibles has also reduced relative to the size of the portfolio, sequentially.”
Me: OK. Isn’t this quite high?
Other than that a lot to like customer loyalty and retention rates are improving consistently and clients are buying more. Aver items per buyer up 17% and up 50% over pre-pandemic. Shipping and logistics they believe is a “key lever to drive e commerce penetration.” And they intend to keep scaling their warehouse operations, which I agree are moats that will offer difficulty to SeaLimited.
•Sold 4.7M MPOS 2021 just launched in Chile.
•EBITA improving
Lots of levers to pull and ecosystem being created.
Their long term goal is to “Gain overall market share while growing profits.”
In the battle between SeaLimited and MELI my money is on Meli.
Jille