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MercadoLibre's (MELI) Q3 Earnings Beat, Revenues Rise Y/Y

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MercadoLibre, Inc. (MELI - Free Report) reported third-quarter 2020 earnings of 28 cents per share, beating the Zacks Consensus Estimate of 8 cents. Further, the bottom line came against the loss of 97 cents per share in the year-ago quarter.

Revenues surged 85% on a year-over-year basis (148.5% on an FX-neutral basis) to $1.12 billion. Moreover, the top line surpassed the Zacks Consensus Estimate of $1.01billion.

Revenues were driven by accelerating commerce and fintech revenues, which grew 109.3% and 52.3% each year over year to $724.5 million and $391.2 million, respectively.

Notably, the boom in e-commerce space owing to the coronavirus-induced social distancing and stay-at-home restrictions remained a tailwind. Increasing traffic on the company’s online platform was a positive.

Further, increasing total payments volume (TPV), courtesy of a robust Mercado Pago and mobile-point-of-sale (MPOS) businesscontributed well. Moreover, a solid momentum across Mobile Wallet benefited the results.

Moreover, the company’s rising gross merchandise volume (GMV), led by an accelerating mobile GMV, contributed 70% to total GMV. Also, mobile GMV soared 283.8% year over year.

Also, strong shipmentgrowth via MercadoEnvios during the reported quarter was another positive. Growing penetration of managed networks was also a tailwind.

Shares of MercadoLibre have returned 130% on a year-to-date basis, outperforming the industry’s rally of 63.9%.

Quarter in Detail

Brazil: Net revenues in the third quarter were $610.7 million (54.7% of total revenues), up 57% year over year. This can be attributed to GMV in the country, which improved 74% year over year. Notably, the company witnessed a growing penetration of its Mecado Envios’ managed network and a strong uptrend across fast delivery services contributed to the top-line growth in the country. Also, the surge in online payments was beneficial.

Argentina: This market generated revenues of $284.7 million (25.5% of the top line), which soared 145% year over year. The company witnessed solid growth in GMV across the country, which skyrocketed 242% year over year.Growing adoption of managed networks remained a boon. Solid growth in online payments along with a strong momentum across MPOS payments contributed well.

Mexico: Net revenues in the reported quarter were $150.4 million (13.5% of revenues), up 111% year over year. This primarily came on the back of a robust GMV, which improved more than 100% from the prior-year quarter.

Other countries: These markets generated revenues worth$69.8 million (6.3% of total revenues), climbing 173.7% on a year-over-year basis. Notably, the combined GMV of Colombia and Chile surged 200% from the year-ago quarter.

MercadoLibre, Inc. Price, Consensus and EPS Surprise

MercadoLibre, Inc. Price, Consensus and EPS Surprise

MercadoLibre, Inc. price-consensus-eps-surprise-chart | MercadoLibre, Inc. Quote

Key Metrics

GMV of $5.9 billion jumped 62.1% year over year and 117.1% on FX-neutral basis.

New confirmed registered users during the period were 16.8 million, increasing 21.7% on a year-over-year basis.

The number of successful items sold was 205.7 million, up 109.9% year over year. Moreover, the number of successful items shipped surged 131% year over year to 187.6 million. This can be attributed to a sturdy performance of MercadoEnvios.

Total payment volume (TPV) was up 91.7% on a year-over-year basis to $14.5 billion, driven by a strong performance of MercadoPago. Further, off-platform payments volume (online-to-offline) that grew 114.3% from the year-ago quarter remained a positive.

Additionally, MPOS business witnessed TPV growth of 85% year over year.Further, a rapid adoption of MercadoLibre’s Mobile Wallet generated $3.2billion in transactions, up 380.5% year over year. Additionally, the user base of mobile wallet climbed 125.2% from the year-ago quarter.

TPV on marketplace was $5.6 billion, up 67.2% year over year. Further, total payments transactions skyrocketed 146.6% year over year to 559.7 million.

Unique active users totaled 76.1 million, up 92.2% year over year.

Operating Details

For the third quarter, gross margin was 43%, contracting 420 basis points (bps) year over year.

Operating expenses as a percentage of total revenues were 35.6%, contracting significantly from 60.7% in the prior-year quarter.

The company generated $83.1 million of income from operations in the third quarter against the year-ago quarter’s loss of $81.9 million.

Balance Sheet

As of Sep 30, 2020, cash and cash equivalents were $1.14 billion compared with$1.17 billion as of Jun 30, 2020.

Short-term investments were $2.2 billion in the third quarter, up from $2.1 billion in the previous quarter.

Accounts receivable amounted to $40.9 million, down from $42.4 million in the second quarter. Further, the inventory level at the end of the third quarter was $46.6 million, up from $20.8 million at the end of the prior quarter.

Zacks Rank & Other Stocks to Consider

MercadoLibre currently sports a Zacks Rank #1 (Strong Buy). Alibaba Group Holding Limited (BABA - Free Report) , Revolve Group, Inc. (RVLV - Free Report) and The Kroger Co. (KR - Free Report) are some other top-ranked stocks in the broader Retail-Wholesale sector, each carrying a Zacks Rank #2 (Buy) at present. You can see the complete list of today’s Zacks #1 Rank stocks here.

Long-term earnings growth rate for Alibaba, Revolve and Kroger is pegged at 19.76%, 17.3% and 6.2%, respectively.

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