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MercadoLibre Set to Report Strong Q1 2025 Earnings on May 7
MercadoLibre (MELI) is scheduled to release its first-quarter 2025 results on May 7.
The Zacks Consensus Estimate anticipates first-quarter revenues of $5.53 billion, reflecting a year-over-year growth of 27.54%. The consensus estimate for earnings stands at $7.67 per share, indicating growth of 13.13% compared to the previous year.
MELI Estimate Movement
Image Source: Zacks Investment Research
MELI Earnings Surprise History
In the last reported quarter, the company achieved an earnings surprise of 73.69%. Notably, MercadoLibre has outperformed the Zacks Consensus Estimate in three of the last four quarters, with an average surprise of 16.37%.
Earnings Whispers for MELI
Currently, our model suggests a likely earnings beat for MercadoLibre this quarter. A combination of a positive earnings ESP and a Zacks Rank of #1 (Strong Buy), #2 (Buy), or #3 (Hold) enhances the prospects of an earnings exceedance. Presently, MELI holds an earnings ESP of +2.30% along with a Zacks Rank #3.
Factors Influencing MELI’s Upcoming Results
MercadoLibre’s e-commerce platform saw robust growth in 2024, exceeding 100 million unique buyers. Enhancements to user experience, including features like virtual try-ons and tire installation scheduling, contributed to this surge. The launch of Full Super—a new grocery section—aimed to improve shopping convenience and encourage reorder speed, thereby strengthening customer engagement in Q1 2025.
In addition, during the previous quarter, user frequency and growth in low-ticket categories were notably strong. All these factors suggest the forthcoming quarter’s revenue growth could remain substantial, driven by a robust e-commerce environment. The advertising segment is anticipated to have made a modest contribution to revenues, supported by strengthened partnerships and advancements in advertising technology.
Furthermore, Mercado Pago, the company’s fintech arm, surpassed 60 million monthly active users in 2024, aided by the introduction of 5.9 million new credit cards. Strategies like instant access to pre-approved credit and flexible payment plans boosted user engagement, particularly during significant purchases. Continued expansion in credit offerings and new investment products is expected to positively impact revenues.
However, it is also essential to note the seasonality effects that typically result in fewer listings post-holidays, leading to weaker demand during the first quarter, which historically remains the weakest for the company.
Competitive pressure from giants like Amazon (AMZN), Alibaba (BABA), and Walmart (WMT), particularly in Mexico and Brazil, could intensify. These rivals apply pricing pressures and leverage their brand recognition, potentially challenging MELI’s market share and user retention in this quarter.
Top-Line Growth Estimates for Q1
The Zacks Consensus Estimate for first-quarter 2025 revenues in Argentina is $1.15 billion, representing an 11.9% decrease from the prior year’s figure. For Brazil, the estimate stands at $3.08 billion, indicating a 1.72% decline, while Mexico’s revenues are expected to be $1.21 billion, which reflects a 9.94% drop. Revenues from other countries are expected to reach $271 million, suggesting a slight increase of 0.74% compared to last year.
MELI Price Performance & Stock Valuation
MELI shares have posted a 34.1% return year-to-date, outperforming the declines of 1.6% in the Retail-Wholesale sector and 3.7% in the S&P 500. The company continues to capitalize on its strong position within the Latin American market, benefiting from the accelerated growth of both commerce and fintech sectors.
MELI’s YTD Price Performance
Image Source: Zacks Investment Research
Regarding valuation, MELI currently trades at a forward 12-month Price/Sales ratio of 4.15X, significantly higher than the Zacks Internet – Commerce industry average of 1.86X. This valuation suggests market expectations for substantial growth, yet it poses a challenge for value-focused investors. The associated value score of D indicates that MercadoLibre’s current valuation may be less attractive.
MELI Trades at a Premium
Image Source: Zacks Investment Research
Investment Considerations
MercadoLibre enters its first quarter of 2025 with strong engagement across its commerce and fintech platforms, supported by the robust user growth and innovative offerings.
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MercadoLibre’s Growth Prospects Amid Competitive Challenges
MercadoLibre, Inc. (MELI) is currently benefitting from expanding credit products and enhanced logistics. Despite this, investors may want to adopt a hold strategy as they approach earnings reports. The increased promotional activities could negatively impact marketplace take rates, and ad monetization remains in its initial stages of development. Additionally, the usual seasonality of the first quarter might have exerted pressure on revenues and profits. While MELI’s long-term position appears strong, a more patient approach could yield better risk-reward dynamics for investors.
Conclusion
MercadoLibre demonstrated impressive financial performance in the last quarter, showing a promising growth trajectory. However, its current valuations may be considered unattractive as the stock trades at a premium. Expected seasonality and heightened competition suggest that investors should hold their positions while waiting for a more favorable entry point. With rising gross merchandise volume (GMV) and the expansion of its fintech services, there is long-term growth potential. However, investors may benefit from exercising patience ahead of the upcoming first-quarter results.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
