MercadoLibre setting up for good buy opportunityHello,
MercadoLibre, Inc. engages in the development of an online commerce platform with a focus on e-commerce and related services. It operates through the following geographical segments: Brazil, Argentina, Mexico, and Other Countries.
TECHNICAL ANALYSIS- Checklist
1. Structure drawing (Trend line drawing on past price chart data)- As shown below
2. Patterns identification (Naming patterns on past price chart data for future wave)- The stock is currently correcting & forming a bullish expanding triangle.
3. Future indication (Reading indicator for future wave)- 0 crossover about to happen
4. Future wave (Drawing on future price chart using future indication from indicator)- As shown below
5. Future reversal point (Identifying trend reversal point on price chart using structure)- Target point as shown
From 2018 to 2023, the company experienced significant growth in its financial metrics. Total revenue rose from $1.44 billion in 2018 to $14.47 billion in 2023. Gross profit increased from $655.55 million in 2018 to $6.95 billion in 2023. Net income shifted from a loss of $36.59 million in 2018 to a profit of $987 million in 2023. The company’s earnings per share (EPS) improved from -$0.82 in 2018 to $19.35 in 2023. Total assets grew from $2.24 billion in 2018 to $17.65 billion in 2023, while total liabilities increased from $1.90 billion in 2018 to $14.58 billion in 2023.
Highlights of the Nine months ended September 30th 2024
net revenue and financial income reached $14.718 billion, a significant increase from $10.698 billion in the same period of 2023.
Gross Profit: Gross profit rose to $6.828 billion for the nine months ended September 30, 2024, compared to $5.540 billion in the same period of 2023.
Net Income: Net income surged to $1.272 billion for the nine months ended September 30, 2024, up from $0.822 billion in the same period of 2023.
Earnings Per Share (EPS): Basic earnings per share as of September 30, 2024, stood at $25.09.
Total Current Assets: As of September 30, 2024, total current assets were $17.824 billion, up from $14.294 billion as of September 30, 2023.
Total Current Liabilities: Total current liabilities as of September 30, 2024, increased to $4.308 billion, compared to $3.278 billion as of September 30, 2023.
Opportunities
The rising adoption of digital payments and growing preference for online shopping reinforce a strong, long-term growth trajectory for MercadoLibre.
Expanding its first-party sales business enables MercadoLibre to better compete during major holiday seasons by offering strategic discounts on flagship products.
Providing consumer and small-business loans addresses critical gaps in traditional financial services while fostering stronger ties between merchants, customers, and the MercadoLibre platform.
Risks to consider
Intense competition among fintech rivals may lead to slower-than-anticipated growth or reduced net interest margins for Mercado Pago's consumer, merchant, and credit card product lines.
Escalating macroeconomic challenges in Argentina could heighten foreign exchange losses or, in extreme scenarios, disrupt the market entirely.
Unique linguistic, trade, and cultural differences in the region pose challenges for cross-border sales, necessitating the upkeep of distinct marketplace platforms in each country.
Our recommendation
MercadoLibre’s profitability missed expectations, but the company’s focus on strengthening its competitive position is encouraging. Key areas like its logistics network (Mercado Envios), growing ads business, and new Prime-like program (Meli Mais) continue to improve. Despite slight underperformance, strong growth in consumer credit and a better business environment in Argentina are positives. With $6.7 billion in cash and a $400 million credit facility, MercadoLibre is financially strong. Shares remain slightly expensive, but the current correction could present a buying opportunity around the $1,850 level.
Our recommendation is a wait to buy at around $1,850 with a target of $2,600.
Current price: $1952 (3rd December, 2024)
