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MercadoLibre (MELI) Up 8.5% Since Last Earnings Report: Can It Continue?
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A month has gone by since the last earnings report for MercadoLibre (MELI - Free Report) . Shares have added about 8.5% in that time frame, outperforming the S&P 500.
Will the recent positive trend continue leading up to its next earnings release, or is MercadoLibre due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important catalysts.
MercadoLibre 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) business contributed 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.
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.
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.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed an upward trend in fresh estimates. The consensus estimate has shifted 2124% due to these changes.
VGM Scores
Currently, MercadoLibre has a strong Growth Score of A, though it is lagging a lot on the Momentum Score front with a C. However, the stock was allocated a grade of F on the value side, putting it in the lowest quintile for this investment strategy.
Overall, the stock has an aggregate VGM Score of C. If you aren't focused on one strategy, this score is the one you should be interested in.
Outlook
Estimates have been trending upward for the stock, and the magnitude of these revisions looks promising. Notably, MercadoLibre has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.
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MercadoLibre (MELI) Up 8.5% Since Last Earnings Report: Can It Continue?
A month has gone by since the last earnings report for MercadoLibre (MELI - Free Report) . Shares have added about 8.5% in that time frame, outperforming the S&P 500.
Will the recent positive trend continue leading up to its next earnings release, or is MercadoLibre due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important catalysts.
MercadoLibre's Q3 Earnings & Revenues Beat Estimates
MercadoLibre 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) business contributed 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.
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.
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.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed an upward trend in fresh estimates. The consensus estimate has shifted 2124% due to these changes.
VGM Scores
Currently, MercadoLibre has a strong Growth Score of A, though it is lagging a lot on the Momentum Score front with a C. However, the stock was allocated a grade of F on the value side, putting it in the lowest quintile for this investment strategy.
Overall, the stock has an aggregate VGM Score of C. If you aren't focused on one strategy, this score is the one you should be interested in.
Outlook
Estimates have been trending upward for the stock, and the magnitude of these revisions looks promising. Notably, MercadoLibre has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.