MercadoLibre reported earnings today of $5.15 which is up 57% yoy vs $4.13 expected, and Revenues are up 57% YOY to $3.4B.
- Total payment volume using its payment app increased to $ 30.2B, up 89% YOY
- Total Payment Volume $42.1B, up 96.6% YOY
- Credit portfolio $3.3B up 21% YOY. The profitability increasing and bad loans stable
- Gross Merchandize Volume $10.5B
58% of their growth came from Mexico and Brazil. IMO, reasons for the growth is that geopolitically, these are better countries to do business with than China, Latin America has growing populations, internet penetration is low compared to other parts of the world, and large unbanked populations. The internet penetration for Mexico is about 66% and Brazil is about 67%. The unbanked population of Mexico is about 63% and Brazil is about 30%.
MELI provided strong results throughout the pandemic, but I experienced significant pain with MELI the last two years. In '21 I was down 24% and in '22 I the stock was down an additional 22%. I did well with MELI in '22 through the judicious use of options, but switched to holding the shares of the stock in '23. MercadoLibre is up about 47% on the year and 10.4% today.
MercadoLibre has been punished historically because of fears of Amazon and SEA Limited competition as well as post pandemic drops in business. Those fears have never materialized as business problems, and MercadoLibre remains as strong as ever. For these reasons, you can buy this stock for a price to sales ratio of 5.2. It’s PE is 95, BUT it’s margins are steadily increasing, and it’s PEG is about 1.7. These are high due to investments needed to build out the businesses. Those ratios are expected to rapidly improve.
Maybe you should consider investing with me in MELI, it’s now my largest holding at about 20.1%.