MercadoLibre’s Strong Quarter Sparks Investor Optimism
Growth and Expansion Fueling Business Success
MercadoLibre (NASDAQ: MELI) is facing its fair share of challenges, typical for any company, yet it stands ready for impressive growth over the next decade. Investors currently have the opportunity to buy shares at a substantial discount, estimated at 50 cents on the dollar.
Despite being valued at a high rate of 46 times its 2024 earnings estimates, analysts argue that this does not fully reflect its true potential, which is significantly underestimated.
As Latin America’s foremost eCommerce platform, MercadoLibre is not just maintaining its position but also extending its reach and increasing market penetration. Recently, it was trading at merely 7 times its projections for 2033, which experts believe represents a conservative estimate. In comparison, competitors like Amazon (NASDAQ: AMZN), Walmart (NYSE: WMT), and Shopify (NYSE: SHOP) trade at multiples ranging from 15 to 21 times their 2033 estimates, growing at rates less than half of MercadoLibre’s potential. Consequently, this difference suggests a possible share price increase of 100% to 200%, fueled by price multiple expansion that has begun following the Q4 2024 earnings announcement.
Strong Q4 Results Highlight Operational Success
MercadoLibre capped off the year with a robust Q4, largely driven by strategic investments in its ecosystem, which encompasses technology, fulfillment services, and operational capacity. The company reported net revenue of $12.61 billion for Q4, reflecting a year-over-year increase of 37.4% and surpassing MarketBeat’s consensus by 200 basis points.
This growth was propelled by a 33% rise in total payment volume, a 24% increase in unique buyers, and an 8% boost in gross merchandise volume—these figures jumped to 49% and 56%, respectively, when factoring in foreign exchange rates.
Despite facing challenges with currency fluctuations, MercadoLibre is thriving as the eCommerce sector captures market share from traditional retail, driven by inflationary pressures on daily and essential goods.
Notably, margin development tells an even more compelling story. The combination of diversified revenue streams, better operational efficiency, and improved leverage resulted in a 60 basis point increase in the operating margin and an almost 300 basis point rise in the adjusted net margin.
As a result, adjusted earnings reached $12.61, representing nearly a 60% year-over-year increase and exceeding consensus forecasts by over $5.00. While the company did not provide specific guidance, the momentum is clearly positive, with substantial double-digit growth across its key markets, and plans for increased capacity in the upcoming years.
Strengthening the Balance Sheet for Future Growth
While MercadoLibre does not currently return significant capital to shareholders—there is no dividend and minimal stock buybacks—there remains a clear upside for investors. The company is self-funding its growth, boasting a solid balance sheet and steadily building its equity position.
As of the end of 2024, there was a notable increase in liabilities connected to the expanding business, particularly in the fintech sector, counterbalanced by a substantial rise in assets leading to double-digit growth in equity. An impressive 41% equity increase was recorded, building on a 68% gain noted at the conclusion of F2024, with further growth anticipated in 2025.
Analyst sentiment is turning bullish, indicating a positive shift in outlook as 2025 begins. Trends show increased analyst coverage compared to early 2024, strong confidence reflected in the Buy ratings, and a move from price target reductions to increases as the end of January approached.
In light of its Q4 performance, MercadoLibre shares surged over 12% in early premarket trading, marking a new high that brings exciting potential targets into focus.
The stock has rallied consistently since its low in 2022, establishing a trading range and a price “flag pole” valued at $1,400. Breaking through this range could see the stock advance by another $1,400, propelling it closer to a price of $3,500, more in line with valuations of its peers.
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The views and opinions expressed herein belong entirely to the author and do not necessarily represent those of Nasdaq, Inc.
