Mercadolibre (NASDAQ: Millie) It has been a great stock for patient long-term investors but has been in the doldrums since the company’s last earnings report. In the roughly two months since then, MercadoLibre stock has fallen about 20%.
While the initial decline was due to a lack of expectations in the bottom line and there are some legitimate concerns about profitability, now could be an excellent time for long-term investors to buy the stock. Not only is MercadoLibre’s core business growing at a rapid pace, but there are also some big future catalysts that could multiply revenues several times over in the coming years.
One thing that’s important to note is that MercadoLibre’s stock price is in the $1,700 range, so you’ll need to use a broker that offers quotes. Investing in fractional shares To buy $500 worth of its shares. But it can be a great way to put your money to work.
As mentioned earlier, the biggest reason MercadoLibre declined post-earnings is because it missed earnings expectations. The company’s EBIT margin fell 7.4 percentage points year over year in the third quarter, due to a combination of more growth investments and bad debt. and Free cash flow It was actually negative.
To be clear, this is definitely worth paying attention to. But it is important to realize that MercadoLibre’s business is still growing very quickly. The e-commerce marketplace sold 28% more goods than a year ago and added more than 10 million active buyers. Mercado Pago’s payment processing business has grown 34% year over year, and now has more than $200 billion in annual payments volume. Last but not least, the emerging and impressive credit business now has $6 billion in outstanding loan balances, up 77% from Q3 2023.
First and foremost, MercadoLibre’s core businesses could still have plenty of room to grow. E-commerce penetration in the US is about 16% of total retail, and is even lower in the Latin American markets where MercadoLibre operates. The same can be said about the adoption of cashless payment, and there is a large unbanked and underbanked population in this region of the world.
The Latin American market has more than 650 million people, about twice the size of the United States, and as logistics services improve rapidly in the region, this market will enable more buyers and sellers online.
It is also important to note that MercadoLibre has several other companies that are still in their early stages and have high potential. The company’s credit card business, part of the previously mentioned credit portfolio, has nearly tripled in size over the past year. There is the investment platform that is still in the relatively early stages and saw its assets under management rise by 93% in the last quarter.
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