MercadoLibre (MELI) +20% is trading at new all-time highs after beating first quarter estimates on the top and bottom lines.
MercadoLibre is Latin America's leading e-commerce technology company. The company is successfully transforming from a pure third-party marketplace into the leading eCommerce ecosystem and digital financial services platform in Latin America. The Argentinian company's largest market is Brazil, which accounts for nearly two-thirds of gross billings.
Net revenues accelerated for the fourth consecutive quarter, excluding the impact of foreign exchange rates, to 93% growth yr/yr.
Gross merchandise volume accelerated to 27% growth excluding FX, up from 18% in the fourth quarter. While GMV missed estimates, that miss did not flow through to net revenue as the company also offered fewer free shipping subsidies.
More importantly, total payment volume through MercadoPago grew 83% excluding FX to a record $5.6 bln, beating estimates. The company's mobile point-of-sale (MPOS) devices represented 44% of total off-platform payment volume and grew 260% yr/yr excluding FX. The MPOS business serves as a key distribution tool to expand the company's ancillary fin-tech offerings.
MercadoLibre reported a modest profit after five consecutive quarters of modest losses. MercadoLibre is managing the business for long-term growth.
Analysts at Deutsche Bank and Susquehanna upgraded the stock this morning in response to these strong first quarter results.
With an enterprise value of over $26 bln, the stock trades at ~12x sales. While that is not cheap, the company is expected to grow net revenue 52% this year and 38% next year. MercadoLibre is expected to become profitable this year and expand margins going forward as its various higher margin businesses scale.