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Bull of the Day: MercadoLibre, Inc. (MELI)

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The company has been called the Amazon (AMZN - Free Report) of Argentina and the eBay (EBAY - Free Report) of Latin America. Shares of MercadoLibre (MELI - Free Report) have skyrocketed over 115% in 2019 alone. And the e-commerce powerhouse is set to expand, with a focus on digital and mobile payments. So let’s see why MELI stock is Tuesday’s Bull of the Day.

Business Overview

Buenos Aires, Argentina-based MercadoLibre’s website serves nearly 20 countries, with Brazil, Argentina, and Mexico by far its largest and most important markets. The company closed the first quarter of 2019 with 280 million registered users, up from 223 million in the prior-year quarter. Before we go any further, investors should note that Amazon and Alibaba (BABA - Free Report) currently have limited exposure in MercadoLibre’s biggest markets. 

Last quarter, MercadoLibre saw its revenue soar 93% on an FX neutral basis and roughly 48% overall, with the big difference due to the strength of the U.S. dollar. Much of this jump was based on the power of the company’s payment platform, known as MercadoPago. Total payment volume topped the $5.5 billion mark for the first time, up 35% in USD and 82.5% on an FX neutral basis.




MercadoLibre said that its mobile wallet business reached four times the number of active payers in Q1 2019, with total payment volume in Argentina, Brazil, and Mexico pulling in triple digit growth year-over-year. The company also offers a broader suite of fintech products, which includes QR code in-store payments, mobile point of sale, and more.

The company will continue to invest heavily in its payment infrastructure and logistics in growing e-commerce markets, where some consumers still don’t have bank accounts. MercadoLibre’s expansion in digital payments comes as fintech proliferates from Square (SQ - Free Report) to big banks. Plus, in March the Latin American powerhouse announced that it would raise as much as $1.85 billion in a secondary stock offering, which included a $750 million strategic investment from PayPayl (PYPL - Free Report) . “Digital commerce in Latin America is experiencing tremendous growth and MercadoLibre is well-positioned for continued leadership,” PayPal CEO Dan Schulman said in prepared remarks.

Price Movement

Clearly, there seems to be a lot to be excited about in terms of MercadoLibre’s growth potential. And we can see that its revenues have soared in recent years, which has helped its stock price climb nearly 600% in the last five years. MELI stock is also up over 100% in the last 12 months and closed regular trading Monday at $629.97 per share, not too far off from its 52-week intraday highs of $672.55.




Outlook & Earnings Trends

Moving on, our current Zacks Consensus Estimate calls for the company’s second quarter 2019 revenue to surge 48.4% from the year-ago period to $497.58 million, with the strong U.S. dollar set to make MELI’s top-line growth appear weaker than it really is. MercadoLibre’s full-year fiscal 2019 revenue is projected to soar 50% to $2.15 billion. Peeking further down the road, the company’s 2020 revenue is expected to surge 39% higher than our current year estimate to hit $2.99 billion.

Until last quarter, the company had struggled to post positive adjusted earnings, as it spent heavily on expansion. With this in mind, MercadoLibre’s adjusted Q2 EPS figure is expected to climb from a loss of $0.25 in Q2 2018 to positive $0.28 per share. On top of that, the company’s full-year fiscal 2019 earnings are projected to skyrocket from a loss of $0.82 per share to +$1.16. Better still, the e-commerce firm’s adjusted 2020 EPS figure is expected to climb 181% higher than our 2019 estimate to $3.26 per share.

On top of this impressive bottom-line growth, we can see just how much more positive analysts have turned recently in terms of MELI’s earnings expectations. The company also blew by our quarterly earnings estimates in each of the last two periods by 533.33% and 66.67%, respectively.




Bottom Line

MercadoLibre’s recent earnings estimate revision strength helps it earn a Zacks Rank #1 (Strong Buy) right now. MELI also sports an “A” grade for Growth in our Style Scores system. Overall, both the top and bottom line outlooks make MercadoLibre an attractive growth play, with the added bonus of providing exposure to growing economies, fintech, and e-commerce.

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