MercadoLibre Stock (MELI): Should I Buy It Now?

By Amit Chowdhry ● June 1, 2020
  • Should you buy MercadoLibre Inc (NASDAQ: MELI) now? Here is some information to help you decide.

MercadoLibre Inc (NASDAQ: MELI) is an Argentina-based company that runs online marketplaces focused on e-commerce and online auctions.  The company was founded by CEO Marcos Galperin while he was attending Stanford University about 21 years ago. Currently, Mercado Libre operates out of Brazil, Argentina, Mexico, Venezuela, and several other Latin American markets.

The market value of the MercadoLibre Inc (NASDAQ: MELI) stock is hovering at between $40 billion and $45 billion. And the stock price had a massive upswing over the last few years (more data on that below).

Total revenue for MercadoLibre Inc (NASDAQ: MELI) had jumped nearly 60% in 2019 to $2.3 billion. And demand for MercadoLibre’s services especially jumped during the coronavirus lockdown.

For the first quarter of 2020, MercadoLibre Inc (NASDAQ: MELI) revenue surged 38% to $652 million. And the growth for April was trending higher than it was prior to the pandemic.

Along with being a major e-commerce player, MercadoLibre Inc (NASDAQ: MELI) has been shifting more into the financial services space. Through the Mercado Pago, consumers in those markets have access to digital payments and asset management.

MercadoLibre Stock Performance – (NASDAQ: MELI) as of 06/01/2020 afternoon

5 day: Up about 3.13%

1 month: Up about 44.81%

3 month: Up about 37.17%

6 month: Up about 45.54%

YTD: Up about 47.74%

1 year: Up about 190.68%

2 year: Up about 684.65%

5 year: Up about 482.61%

Should You Buy MercadoLibre Inc (NASDAQ: MELI) Now?

Based on the reports I have been reading, 52% of analysts are saying buy, 43% of analysts are saying hold, and 5% are saying sell. In another report, I am seeing that 2 analysts are saying strong buy, 7 are saying buy, 6 are neutral, 0 say sell, and 2 say strong sell.

Case From The Bulls

MercadoPago is expected to be longer-term fintech potential through the mobile POS platform and merchant services, mobile wallets, asset management, and credit services. And with Internet penetration in the region being about 70%, MercadoLibre is expected to benefit from the increasing adoption of e-commerce across Latin America, especially on mobile devices. Plus MercadoLibre’s marketplace infrastructure, software engineer expertise, and payment settlement strengths distinguish the company for its rivals.

Case From The Bears

The bears are saying that MercadoLibre operates in more than a dozen Latin American nations using different local currencies, but reports in the U.S. dollar — which exposes its financials to currency swings. And the near-term margins could be pressured by IT and loyalty program investments along with COVID-19 related costs, retention labor expanses, and talent attraction. Plus the tariffs, regulations, and lack of reliable and low-cost cross-border logistics could present cross-selling issues.

Disclosure: I own a small number of MercadoLibre Inc (NASDAQ: MELI) shares. I wrote this article myself and I do not have any business relationship with any company whose stock I write about. I am not a financial advisor and all articles are my opinion. You should do your own due diligence and consider talking to a financial professional before investing.