MercadoLibre’s (MELI) stock price has performed well in the past decade, making it one of the best-performing companies on Wall Street. It has jumped from its listing price of $18 in 2007 to $2,100 today, meaning that a $100 investment in it would now be worth over $11,666. A similar amount invested in Nvidia would be worth about $5,800.
Strong growth and a moat
MercadoLibre is a company that many people in the United States have never heard about. Established in Argentina in 1999, it has grown into a giant e-commerce and fintech company serving millions of people monthly.
MELI has grown its operations to other countries in the Latin American region, including Brazil, Mexico, Colombia, Peru, and Ecuador. It has also grown its business by adding more solutions and investing in logistics.
As a result, its annual revenue has grown from over $651 million in 2014 to over $14 billion in the last financial year. Analysts expect that its annual revenue will hit $20 billion this year followed by $25 billion in 2025.
In addition to its e-commerce solutions, MercadoLibre has expanded its business in other areas. For example, it runs Mercado Pago, a fintech solution that lets people send money, borrow, and invest. Mercado has also unveiled its acquisition segment that has seen strong growth over time.
Most importantly, the company has boosted its logistics and delivery services investments through its Mercado Envios. This business ensures that it delivers its products anywhere in Latin America.
Mercado is still growing
In most periods, companies experience slow growth when they turn 20 years. A good example of this is PayPal, a company that was used to generating double-digit growth. Today, its growth has slowed and is struggling to generate a 10% rate.
Other large companies like Block, formerly known as Square, Wayfair, and TripAdvisor have struggled to continue their growth.
MercadoLibre, on the other hand, is still pumping strong double-digit growth rates organically.
In the most recent financial results, the company demonstrated that it was still growing. Its unique buyers rose to over 56.6 million in the second quarter from 47.6 million in the same period in 2023.
Additionally, the number of same and next-day shipments jumped to over 127.3 million from 111.1 million in the second quarter of 2023.
Mercado Pago also continued seeing strong growth as the number of fintech monthly active users jumped from 37.9 million to 52 million.
The amount of money locked in the ecosystem jumped from $3.5 billion to $6.6 billion, helped by Brazil and Argentina.
Additionally, the acquiring business continued rising, with the total processed volume rising to $33.7 billion from $27.3 billion.
MercadoLibre’s revenue rose to over $5.07 billion from the previous $3.8 billion, while its net income almost doubled to over $531 million.
Analysts are upbeat about MELI
Meanwhile, analysts believe that MercadoLibre will continue doing well in the near term. The average estimate is that its revenue will rise to $5.27 billion in the third quarter, a big increase from the $3.7 billion it made in the same quarter last year.
For the year, analysts expect that its revenue will be $20.1 billion, a 40% increase from 2023. This revenue metric will then grow by 24% in the following year.
Notably, MercadoLibre has a long track record of beating analyst estimates. For example, in the most recent quarter, its EPS was higher than expected by $1.95.
Analysts also expect the stock to continue rising since the average estimate is $2,280, which is about 8.29% above the current level.
Analysts cite its strong market share in the Latin American region, strong investment in logistics, which makes it a tough competitor to beat, and its large ecosystem of businesses that complement each other.
However, the reality is that MercadoLibre is a highly overvalued company that has a forward P/E ratio of 57 and a non-GAAP multiple of 57. These are huge numbers even for a company with these growth metrics. For example, Nvidia, which is growing faster and has a better margin, has a forward P/E ratio of 42.
MercadoLibre stock analysis
MELI chart by TradingView
The weekly chart shows that the MELI share price has been in a strong bull run in the past few years. It recently crossed the important resistance point at $2,021, its highest swing on January 21st and the upper side of the cup and handle pattern.
The stock has remained above the 50-week and 100-week moving averages. Also, the Relative Strength Index (RSI) has formed an ascending channel and is nearing the overbought point. The MACD indicator has also continued rising.
Therefore, the stock will likely continue rising as bulls target the next key point to watch being at $2,250.
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