MELI director's stock sale and margin pressure warrant caution. Despite strong revenue and growth, new investors should wait for the right time to invest.
Shares of Latin American e-commerce and fintech behemoth MercadoLibre (MELI 1.87%) are up over 6,560% since the company's initial public offering (IPO) in 2007. Had an investor bought $15,000 worth of MercadoLibre stock at its IPO, it would now be worth $1 million -- less than two decades later.
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MELI's recent pullback to $1.77K is unwarranted indeed, since the strategic investments have contributed to the robust FQ3'24 performance metrics. At the same time, the credit segment headwinds are likely to be temporal, as the management continues to report healthy credit profile while accelerating into the upmarket segment. Even so, the recent correction has been a gift, since MELI now trades attractively at FWD PEG non-GAAP ratio of 1.41x, offering interested investors with excellent margin of safety.
MercadoLibre NASDAQ: MELI, a leading e-commerce and fintech platform in Latin America, just saw its stock plummet 23% following the release of its Q3 2024 earnings report, leading to concerns about the company's future. While the news might seem discouraging at first glance, some investors, including the renowned Cathie Wood of ARK Invest, have taken advantage of the dip, suggesting a potential buying opportunity for those seeking long-term exposure to the burgeoning Latin American market.
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Shares of the Latin American e-commerce leader just suffered a big post-earnings drop.
The e-commerce company's heavy spending won't last forever, but the growth it produces will.
MELI stock dips 11.6% post-Q3 despite solid growth. Heavy investments pressure margins.
In 3Q24, net revenue grew 4.7% q/q and 35% y/y. However, operating margins were impacted by investments in credit and logistics. MercadoLibre continues to expand its competitive advantages, including credit and logistics operations (five new distribution centers in Brazil and one in Mexico). With a PEG of 1.76x, close to two-year lows, the valuation indicates a buying opportunity despite the elevated price compared to the sector.
I reaffirm my "Buy" rating for MercadoLibre stock, despite a Q3 EPS miss, due to its strong long-term growth potential and undervaluation. MercadoLibre's Q3 2024 report showed solid growth in e-commerce and fintech, with a 35% YoY revenue increase and significant market share gains in Brazil and Mexico. The company's strategic investments in logistics and credit expansion are expected to drive future growth, despite short-term margin pressures.
Investors could not find any enthusiasm in the company's latest reported figures.