MercadoLibre Shares Reach All-Time High Following Strong Earnings Report

Record profits and revenue push Latin American e-commerce giant's stock upward

Shares of MercadoLibre Inc., the leading e-commerce and fintech company in Latin America, soared to record highs after the firm reported impressive earnings that significantly exceeded analyst expectations. In the fourth quarter, the company posted a net income of $639 million, surpassing the median analyst estimate of $406 million, as indicated by data from Bloomberg. Additionally, MercadoLibre achieved revenue of $6.1 billion for the quarter, beating predictions and resulting in a stock price surge of up to 12.5% at the start of trading in New York.

This robust financial performance comes on the heels of a third quarter that disappointed investors, leading to a decline in stock prices due to various profit metrics falling short as a result of heightened investments in logistics and credit services. However, MercadoLibre has made a notable recovery, with its shares rebounding by 37% since the beginning of the year, solidifying its position as the most valuable company in Latin America with a market capitalization of approximately $119 billion.

According to Chief Financial Officer Martin de los Santos, “It was a very good quarter. We thought we had a very good quarter last quarter as well. It doesn’t go in a straight line.” He emphasized that 2024 was likely the company’s best year to date regarding financial and operational results, as well as product improvements.

For the entirety of 2024, MercadoLibre recorded a profit of $1.9 billion and achieved revenue of $21 billion, marking a substantial year-on-year growth of 38%. In the fourth quarter, while the gross merchandise volume reached $14.5 billion, slightly lower than expected, the total payment volume of $59 billion was largely in line with forecasts.

MercadoLibre derives a significant portion of its revenue from Brazil, Mexico, and Argentina. The company reported an increase in assets under management to $10.6 billion and a rise in its credit portfolio to $6.6 billion, with the credit card segment more than doubling over the past year. Despite these positive trends, executives expressed caution regarding credit risk amid macroeconomic uncertainty in Brazil, where interest rates are projected to rise further.

In Argentina, under the leadership of President Javier Milei, who is implementing drastic spending cuts and economic reforms to combat inflation, MercadoLibre has reportedly “quadrupled” its credit portfolio through consumer and merchant loans. However, the company is not yet prepared to offer credit cards in this market.

Goldman Sachs analysts noted that management is committed to investing for sustainable long-term growth, which may lead to margin improvements over time but could also result in volatility from quarter to quarter. The number of unique active buyers on the commerce platform grew to 67 million, while monthly active users of the fintech services increased to 61 million.

The advertising segment, one of the company’s newest and fastest-growing areas, saw a 41% year-on-year increase, reaching 2.1% of the gross merchandise volume. Sean Dunlop, an analyst at Morningstar Research Services LLC, advised investors to wait for a more favorable entry point while highlighting that the company remains in the early stages of a promising growth trajectory, characterized by a recognizable business model and a strengthening economic moat.

Currently, MercadoLibre holds 25 buy recommendations, one hold, and one sell rating from analysts, with a 12-month price target of $2,410 per share, compared to its latest trading price of $2,325. Following the positive earnings report, at least five analysts have raised their price targets.

With a workforce of around 84,000 direct employees, MercadoLibre exceeded 100 million annual active buyers on its commerce platform during 2024, achieving an impressive rate of 57 purchases and 360 transactions every second. Despite past challenges, the company has consistently demonstrated an ability to surpass return expectations, often leading to strong rebounds in stock performance, as noted by analysts from Itau BBA.