We came across a bullish thesis on MercadoLibre, Inc. (MELI) on Multibagger Nuggets’ Substack by Kris. In this article, we will summarize the bulls’ thesis on MELI. MercadoLibre, Inc.’s share was trading at $2047.99 as of October 9th. MELI’s trailing and forward P/E were 74.20 and 45.66 respectively according to Yahoo Finance.
A businesswoman using her mobile device to shop on a ecommerce platform.
Mercado Libre (NASDAQ: MELI) offers a wide array of services that include online marketplace operations, digital payment solutions, and logistics. The core of Mercado Libre’s operations lies in its e-commerce marketplace, which connects buyers and sellers across multiple categories such as electronics, fashion, and home goods. The company generates revenue from various streams, including commissions on sales, advertising services, and the provision of shipping and logistics. A crucial contributor to its revenue is Mercado Pago, a digital payment service that enables secure online payments and transfers. Mercado Pago has experienced significant growth as more Latin American consumers adopt digital payment methods, spurred by increasing smartphone penetration and internet access. The company also offers financing solutions for sellers and buyers, enhancing its value proposition in the e-commerce ecosystem.
Mercado Libre is appealing due to its solid financial performance, strong growth metrics, and strategic positioning in a rapidly growing market. In Q2 2024, the company reported a remarkable 42% revenue growth in U.S. dollars, with an impressive 113% FX-neutral growth, showcasing its resilience in challenging economic conditions, particularly in inflation-prone markets like Argentina. Mercado Libre has also made notable strides in profitability, achieving a net income margin of 10.5% for Q2 2024, which reflects effective cost management and operational efficiency amidst significant revenue growth.
The company has maintained a consistent upward trajectory in both Free Cash Flow and Operational Cash Flow, which supports investments in strategic initiatives such as fulfillment infrastructure, technology enhancements, and market expansion. As the “Amazon of Latin America,” Mercado Libre holds a dominant position in the e-commerce sector, with its unique regional presence and comprehensive service offerings providing a competitive moat against both local and global rivals. The total addressable market (TAM) in Latin America remains substantial and underpenetrated, and as internet usage rises and more consumers turn to e-commerce, Mercado Libre is well-positioned to capture this growth. The company’s commitment to innovation, as seen in the launch of Meli+—a subscription service similar to Amazon Prime—demonstrates its adaptability to market demands. Additionally, investments in generative AI integration indicate a forward-thinking approach aimed at enhancing user experience and operational efficiency.
Mercado Libre (MELI) is a stock that investors at least should look at as the company has demonstrated exceptional growth while continuing to invest heavily in its fulfillment network. Despite these investments, MELI has maintained profitability and steadily expanded its market share, thanks to efficient marketing and well-aligned operational strategies. Key drivers like Mercado Pago, its fast-growing advertising business, and subscription service Meli+ position the company for sustained innovation and long-term growth. With Latin America’s rapid digital adoption and e-commerce expansion, MELI’s leading position provides significant growth potential. The stock’s 2024 price-to-earnings (PE) ratio of 52.64, paired with an EPS growth rate of 63%, gives it a PEG ratio of 0.83, indicating it remains attractively priced for a growth stock. The PEG for 2025 and 2026, at 1.19 and 0.85 respectively, further support the case for long-term undervaluation as consensus growth estimates rise.
MercadoLibre, Inc. is not on our list of the 31 Most Popular Stocks Among Hedge Funds. As per our database, 84 hedge fund portfolios held MELI at the end of the second quarter which was 79 in the previous quarter. While we acknowledge the risk and potential of MELI stock as an investment, our conviction lies in the belief that some AI stocks hold greater promise for delivering higher returns, and doing so within a shorter timeframe. If you are looking for an AI stock that is more promising than MELI but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
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Disclosure: None. This article was originally published at Insider Monkey.
