Core Viewpoint - MercadoLibre's stock price dropped 16% following its Q3 earnings report, despite strong revenue growth, due to a significant miss in net income expectations [2][3]. Financial Performance - Revenue increased by 35% year over year to $5.31 billion, surpassing analysts' estimates by $30 million [2]. - Net income grew by only 11% to $397 million, missing expectations by $2.02 per share [2]. - Adjusted free cash flow declined by 40% year over year to $635 million in the first nine months of the year [8]. Growth Metrics - From 2013 to 2023, MercadoLibre's gross merchandise volume had a CAGR of 20%, total payment volume saw a CAGR of 54%, and total revenue had a CAGR of 41% [3]. - Unique buyers on the platform increased from 20.2 million to nearly 85 million [3]. - In Q3 2023, gross merchandise volume growth was 59%, total payment volume growth was 121%, and unique active buyers growth was 18% [6]. Market Expansion - The company operates in 18 Latin American countries, with significant revenue coming from Brazil, Mexico, and Argentina [4]. - The fintech segment grew its monthly active users by 35% year over year to 56.2 million, with assets under management increasing by 93% to $7.97 billion [7]. Margin and Investment Strategy - Operating and net margins shrank sequentially and year over year in Q3 2023, attributed to rising investments for long-term growth [8][9]. - The strategy involves sacrificing near-term margins to capitalize on structural growth opportunities in Latin America [10][11]. Valuation and Future Outlook - Analysts project revenue growth at a CAGR of 28% from 2023 to 2026, with EPS increasing at a CAGR of 49% [12]. - The stock trades at 38 times forward earnings and 4 times next year's sales, which is considered attractive relative to its growth potential [12]. - Concerns regarding inflation and currency devaluation in Latin America are currently impacting valuations, but long-term prospects remain positive [13].

Core Viewpoint - MercadoLibre's heavy spending is a strategic investment in growth, despite disappointing third-quarter earnings results that led to a significant drop in stock price [1][3][13] Financial Performance - MercadoLibre reported a per-share profit of $7.83, missing the consensus estimate of $10, while sales grew 37% year over year [3][5] - Operating income fell by 29% during the three-month period ending in September due to increased spending across various categories [5][10] Market Position and Growth Potential - MercadoLibre is often compared to Amazon, eBay, Shopify, and PayPal, serving as a comprehensive e-commerce platform in South America [4] - The company processed $50.7 billion in payments in Q3, reflecting a 34% increase from the previous year [4] - Latin America's e-commerce industry is projected to grow by 24% this year and 21% in the following two years, indicating a robust market opportunity [9] Strategic Investments - The company is investing heavily in its credit card business, which has led to a near doubling of provisions for credit losses [5][10] - Increased spending is expected to yield future revenue growth, with analysts predicting that per-share profit could more than triple by 2026 [10][12] Analyst Sentiment - Analysts maintain a consensus price target of $2,381.29, over 30% above the current stock price, indicating strong buy sentiment despite recent earnings disappointments [14]

Core Insights - MercadoLibre's stock declined 11.6% after its Q3 2024 earnings release despite reporting strong growth across its business segments [1] - The company reported earnings of $7.83 per share, missing the Zacks Consensus Estimate by 30.52% but showing a 9.4% year-over-year increase [1] - Revenues increased by 35% year-over-year to $5.3 billion, surpassing the Zacks Consensus Estimate by 1.11% [1] Business Performance - Unique buyers reached almost 61 million, up 21% year-over-year, marking the second consecutive quarter of accelerated growth post-pandemic [4] - E-commerce segment showed strong performance with FX-neutral GMV growth of 34% in Brazil and 27% in Mexico, while Argentina saw a 16% year-over-year increase in items sold [4] - Mercado Pago, the fintech division, reported a 35% year-over-year increase in monthly active users to 56 million, with the credit card portfolio growing 172% year-over-year to $2.3 billion [5] Infrastructure and Investments - The company opened five new fulfillment centers in Brazil and one in Mexico during Q3, which, while creating short-term margin pressure, are essential for long-term growth [6] - Income from operations was $557 million with a margin of 10.5%, reflecting a significant decline of 9.5 percentage points year-over-year due to strategic investments [7] Future Outlook - MercadoLibre's position as the leading e-commerce platform in Latin America, combined with its growing fintech ecosystem, suggests strong long-term potential [8] - The Zacks Consensus Estimate for 2024 revenue is $20.57 billion, indicating year-over-year growth of 42.13%, with earnings estimated at $35.49 per share, suggesting an 82.37% rise [10] Competitive Landscape - MercadoLibre faces rising competitive pressure from Amazon and Walmart, which are expanding their presence in Latin America [11] - Market uncertainties, high inflation, and recessionary fears are headwinds for the company, impacting margins due to increased investments [12] Valuation Metrics - The stock's current price-to-sales (P/S) ratio is significantly higher than the industry average, indicating a stretched valuation [13] - The forward 12-month Price/Sales ratio is 3.86 compared to the Zacks Internet - Commerce industry's 1.8, suggesting vulnerability to negative developments [13]

Core Insights - The article emphasizes the importance of in-depth research and insights for informed investment decisions in the Latin American equity market [1] Group 1 - The company has over 5 years of experience in equity analysis specifically focused on Latin America [1] - The research provided aims to assist clients in making informed investment decisions [1]

Core Insights - The article discusses the initiation of coverage on MercadoLibre, Inc. (NASDAQ: MELI) stock, which was rated as a "Buy" during a correction period in April 2024 [1] - The analysis highlights the marginality decline experienced by MELI in Q4 FY2023, indicating potential investment opportunities [1] Company Analysis - MercadoLibre, Inc. is positioned in a correction phase, which may present a buying opportunity for investors [1] - The company has shown resilience and potential for recovery, as indicated by the analyst's positive outlook despite recent challenges [1] Analyst Background - The chief investment analyst, Daniel Sereda, operates within a family office and has extensive experience in navigating diverse asset classes and information [1] - The investing group, Beyond the Wall Investing, provides insights similar to those prioritized by institutional market participants, enhancing the quality of analysis available to investors [1]

Core Insights - Investors showed a lack of enthusiasm regarding the latest reported figures from MercadoLibre, which is often referred to as the Amazon of Latin America [1] - MercadoLibre is achieving growth rates that surpass those of its U.S. counterpart, Amazon [1]

Group 1 - The company aims to invest in firms with strong qualitative attributes, purchasing them at attractive prices based on fundamentals, and holding them indefinitely [1] - The investment strategy involves managing a concentrated portfolio to avoid underperformers while maximizing exposure to high-potential winners [1] - The company plans to publish articles on selected companies approximately three times a week, with detailed quarterly follow-ups and ongoing updates [1] Group 2 - The analyst has no current stock, option, or derivative positions in any mentioned companies and does not plan to initiate any within the next 72 hours [2] - The article reflects the analyst's personal opinions and is not influenced by any compensation from companies mentioned [2] - There is no business relationship between the analyst and any company whose stock is discussed in the article [2]

Core Insights - MercadoLibre, a prominent player in Latin American stocks, experienced a decline of over 15% following the release of its Q3 earnings report despite achieving a significant revenue growth of 35% year-over-year, surpassing estimates [1] Financial Performance - The company reported a year-over-year revenue growth of 35%, indicating strong performance in its financial results [1] Market Reaction - The stock's dip of more than 15% post-earnings release suggests a potential disconnect between market expectations and the actual performance, despite the positive revenue growth [1]

Financial Performance - Net revenues and financial income for the nine months ended September 30, 2024, reached $14,718 million, a 37.6% increase from $10,698 million in the same period of 2023[11]. - Gross profit for the nine months ended September 30, 2024, was $6,828 million, compared to $5,540 million in 2023, reflecting a growth of 23.2%[11]. - Net income for the nine months ended September 30, 2024, was $1,272 million, up 55.0% from $822 million in the same period of 2023[14]. - Basic net income available to shareholders per common share increased to $25.09 for the nine months ended September 30, 2024, compared to $16.40 in 2023, marking a rise of 52.0%[12]. - Operating expenses for the nine months ended September 30, 2024, totaled $5,017 million, compared to $3,668 million in 2023, indicating a 36.8% increase[11]. - The company reported a net cash provided by operating activities of $4,994 million for the nine months ended September 30, 2024, compared to $3,212 million in 2023, indicating a 55% increase[20]. - The company reported a net income before income tax expense of $1,669 million for the nine months ended September 30, 2024, compared to $1,323 million for the same period in 2023, reflecting a year-over-year increase of approximately 26%[120]. Assets and Liabilities - Total assets increased to $22,623 million as of September 30, 2024, up from $17,646 million at December 31, 2023, representing a growth of 28.1%[9]. - Total current liabilities rose to $14,313 million as of September 30, 2024, from $11,297 million at December 31, 2023, an increase of 26.8%[9]. - Total equity increased to $4,002 million as of September 30, 2024, from $3,071 million at December 31, 2023, representing a growth of 30.2%[9]. - The company’s total liabilities as of September 30, 2024, were $16,685 million, compared to $12,905 million at the end of 2023[140]. - The company’s total short-term investments rose to $4,511 million as of September 30, 2024, compared to $3,480 million at the end of 2023, marking an increase of 29.6%[100]. Investments and Financial Activities - Long-term investments surged to $1,226 million as of September 30, 2024, compared to $162 million at December 31, 2023, reflecting a significant increase of 658.5%[9]. - The company’s net cash used in investing activities was $6,159 million for the nine months ended September 30, 2024, compared to $2,536 million in 2023, indicating a significant increase in investment activity[20]. - The company has committed to purchase cloud platform services totaling $1,000 million, with payments scheduled between August 2024 and February 2030[154]. - The company entered into a $400 million amended and restated revolving credit agreement on September 27, 2024, with interest rates based on Term SOFR plus an interest margin[169][170]. Market Presence and Operations - The company operates e-commerce platforms across 18 countries in Latin America, enhancing its market presence and user base[24]. - The company expects continued growth in both commerce and fintech segments, with a focus on expanding its market presence in Latin America[39]. - MercadoPago S.A. Compañía de Financiamiento began operations in Colombia on April 22, 2024, offering the "Ordinary Deposit" product, subject to regulatory requirements[87]. Regulatory and Compliance - The company has transitioned from a non-regulated to a regulated business, which has influenced its financial operations and reporting[29]. - The company plans to continue adapting to regulatory trends, which may impact future financial performance and operational strategies[32]. - The Central Bank of Brazil's new capital requirements will gradually increase from 6.75% in July 2023 to 10.50% by January 2025 for the company's regulated Brazilian subsidiaries[77]. Credit and Risk Management - The company’s provision for doubtful accounts increased to $1,331 million in the nine months ended September 30, 2024, from $751 million in the same period of 2023, a rise of 77%[20]. - The allowance for doubtful accounts for loans receivable was $1,612 million as of September 30, 2024, compared to $1,084 million at the end of 2023, reflecting a rise of 48.5%[107]. - The total past due loans as of September 30, 2024, amounted to $1,723 million, up from $1,116 million as of December 31, 2023, representing a 54.5% increase[106]. Currency and Foreign Operations - The average exchange rate for the nine-month period ended September 30, 2024, increased by 261.1% compared to the previous year, reflecting significant currency fluctuations[59]. - The company’s total assets located in foreign jurisdictions amounted to $2,405 million as of September 30, 2024, compared to $2,321 million as of December 31, 2023[26]. - The Argentine inflation rate for the nine-month period ended September 30, 2024, was 101.6%, significantly impacting the company's operations in the region[58]. Taxation and Benefits - The company recorded an income tax benefit of $6 million and $1 million for the nine and three-month periods ended September 30, 2024, compared to $35 million and $14 million for the same periods in 2023, respectively[69]. - The estimated effective tax rate decreased from 38.1% to 23.8% for the nine-month period ended September 30, 2024, primarily due to lower taxable foreign exchange gains[66]. - The company recorded $17 million of PIS and COFINS tax benefits arising from ICMS tax incentives as of September 30, 2024[148]. Shareholder Information - The weighted average number of common shares outstanding for earnings per share was 50,697,442 for the nine-month period ended September 30, 2023[92]. - The net income available to common stock for the nine-month period ended September 30, 2024, was $1,272 million, compared to $822 million for the same period in 2023[91]. - Net income per share for the nine months ended September 30, 2024, was $25.09, a 53% increase from $16.40 in the same period of 2023[96].

Core Viewpoint - MercadoLibre's stock declined nearly 16% following disappointing profit results for Q3 2024, despite strong revenue growth [1][4]. Financial Performance - Q3 revenue reached $5.3 billion, representing a 35% year-over-year increase and exceeding expectations [2]. - The company's net profit margin fell to 7.5%, down from 9.5% in the same quarter last year, resulting in earnings per share (EPS) of $7.83, which was below the expected EPS of around $10 [2]. Management's Explanation - Management addressed investor concerns by explaining that margin contraction was due to increased investments in credit card usage and logistics services, which required setting aside more funds for potential losses [3]. - Investments in infrastructure were also highlighted as a cost factor impacting margins [3]. Investor Sentiment - Despite management's explanations, investor dissatisfaction was evident in the stock price reaction [4]. - The company still generated nearly $400 million in net income for Q3, indicating strong overall performance and capacity for future investments [5]. Future Outlook - Investors are encouraged to monitor e-commerce adoption trends and the growth of MercadoLibre's credit portfolio in upcoming quarters [6]. - The company has a history of successful reinvestment into its business, providing a basis for optimism regarding future growth [6].