Core Viewpoint - MercadoLibre, often referred to as the "Amazon of Latin America," is experiencing a stock pullback, raising questions about investment timing despite its significant growth and market position [1][10]. Company Overview - MercadoLibre operates as the largest e-commerce and fintech platform in Latin America, connecting millions of buyers and sellers across 18 countries [1][2]. - The company offers a comprehensive ecosystem including Mercado Envios for logistics, Mercado Pago for payments, Mercado Credito for financing, and Mercado Shops for businesses [2]. Financial Performance - In Q3 2024, MercadoLibre reported a revenue increase of 35% year-over-year, reaching $5.3 billion, and Gross Merchandise Volume (GMV) rose 14% to $12.9 billion [3]. - Total Payment Volume (TPV) increased by 34% to $50.7 billion, indicating strong adoption of fintech services [3]. - Monthly active users surged by 35% to 56 million, reflecting growing engagement on the platform [3]. - GAAP earnings per share grew by 9% to $7.83, although margins faced pressures due to strategic investments [3][6]. Market Position and Valuation - MercadoLibre has a market capitalization of $88 billion and a cash position of $157.5 per share, highlighting its financial strength [4]. - The forward P/E ratio stands at 38.7, which, while high, is considered justified given the company's rapid sales growth and market potential [5][4]. Recent Developments - Following the Q3 earnings report, the stock experienced a sell-off due to concerns over margin contraction, with operating margins contracting by 10 points [6]. - The company's net interest margin after losses (NIMAL) declined by 13 points, attributed to increased credit card growth and upfront provisions for expected losses [6]. Analyst Sentiment - Analysts maintain a "Moderate Buy" rating for MercadoLibre, with a consensus price target indicating a 29% upside potential [7][8]. - Institutional investors hold nearly 88% of shares, reflecting strong confidence in the company's long-term prospects [8]. Technical Analysis - The recent stock pullback brings it closer to multi-year uptrend support at $1,700, aligning with critical moving averages, creating an attractive entry point for investors [9]. Investment Outlook - MercadoLibre is positioned as a compelling investment opportunity in Latin America's growing e-commerce and fintech markets, with strategic investments and strong financial performance suggesting significant upside potential for long-term investors [10].

Valuation and Market Performance - MercadoLibre's current P/E multiple of 40.01X is significantly higher than the Zacks Internet - Commerce industry average of 25.73X, raising concerns about valuation sustainability despite its market leadership and growth trajectory [1] - The company's P/E F12M ratio indicates a stretched valuation [3] - The stock has returned 14.5% over the past year, underperforming the Zacks Retail-Wholesale sector's growth of 31.4% [12] Financial Results and Strategic Investments - MercadoLibre reported a 35% YoY increase in net revenues to $5.3 billion and an 11% YoY growth in net income to $397 million in Q3 2024 [4] - Operating margin declined to 10.5% from 20% YoY due to substantial investments in infrastructure and business expansion [4] - The company opened five new fulfillment centers in Brazil and one in Mexico, reflecting its commitment to infrastructure growth but requiring significant capital expenditure [5] Credit Business Expansion - MercadoLibre's credit portfolio grew 77% YoY to $6 billion, with credit card TPV showing a 166% increase [6] - Credit cards now represent 39% of the total portfolio, up from 25% last year, leading to increased provisions for losses and a decline in Net Interest Margin After Losses to 24% from 37% YoY [6] Market Position and Growth Prospects - The company maintains a strong position in Latin American e-commerce, with FX-neutral GMV growth of 34% in Brazil and 27% in Mexico [7] - E-commerce penetration in Latin America is only 15%, indicating significant room for growth compared to more developed markets [7] - Rising competitive pressure from Amazon and Walmart in the region, particularly in Mexico, is a concern [8] Earnings Estimates and Investment Thesis - The Zacks Consensus Estimate for 2025 is $25.66 billion, indicating a YoY growth of 24.25%, with earnings pegged at $44.65 per share, suggesting a 34.31% YoY rise [11] - Earnings estimates have moved south by 0.6% over the past 30 days, indicating caution [11] - The company's strategic investments, while necessary for long-term growth, may continue to pressure margins in the near term [9] Investment Recommendation - Given the premium valuation, ongoing margin pressures, and potential risks from rapid credit expansion, investors might benefit from waiting for a more attractive entry point in 2025 [15] - Current holders can maintain their positions due to the company's strong market leadership and long-term growth potential, but new investors should wait for multiple compressions or stronger evidence of improved profitability metrics [16][17]

Company Performance - MercadoLibre (MELI) closed at $1,799.42, reflecting a -1.89% change from the previous day's closing price, underperforming the S&P 500's daily gain of 0.55% [1] - The upcoming earnings report is projected to show earnings of $7.89 per share, indicating a year-over-year growth of 142.77%, with revenue expected to reach $5.9 billion, up 38.44% from the prior-year quarter [2] Analyst Estimates - Recent changes to analyst estimates for MercadoLibre suggest positive revisions, indicating analysts' confidence in the company's business performance and profit potential [3] - The Zacks Consensus EPS estimate has decreased by 0.62% in the past month, and MercadoLibre currently holds a Zacks Rank of 3 (Hold) [5] Valuation Metrics - MercadoLibre has a Forward P/E ratio of 41.08, which is a premium compared to its industry's Forward P/E of 24.17 [5] - The company has a PEG ratio of 0.96, which is lower than the Internet - Commerce industry's average PEG ratio of 1.25 [6] Industry Context - The Internet - Commerce industry, part of the Retail-Wholesale sector, has a Zacks Industry Rank of 80, placing it in the top 32% of over 250 industries [6][7] - The Zacks Industry Rank measures the strength of industry groups, with the top 50% rated industries outperforming the bottom half by a factor of 2 to 1 [7]

Market Performance - The S&P 500 returned 23 64% in 2024, while the Nasdaq performed even better with a return of 28 64% [1] Investment Strategy - Potential Multibaggers focuses on stocks with the potential to increase 10x or more over the next decade [1] - The strategy targets long-term investors seeking life-changing returns and who can withstand market volatility [1] Analytical Approach - The analysis emphasizes long-term fundamentals over short-term market noise [2] - Detailed analysis is conducted to ensure the investment thesis remains on track [2]

Professional Background - Former Senior Manager at a Big Four accounting firm with over 20 years of CPA experience [1] - CFO of two privately held companies in the aerospace and defense and beauty industries with sales between $50m and $100m [1] Investment Philosophy - Value investor with a preference for buying wonderful businesses at fair prices, influenced by Buffett and Munger [1] - Open to other investment disciplines if they make sense [1] - Heavy research on companies before and during the investment period, including quarterly financial checkups, conference calls, and news updates [1] - Goal is to hold investments and reinvest dividends, minimizing buying and selling [1] Approach to Analysis - Engages in thorough analysis of investment positions, considering all sides of a situation [1] - Recognizes both positives and risks in any investment, emphasizing the importance of acknowledging their existence [1]

Company Overview - MercadoLibre (NASDAQ: MELI) is referred to as the "Amazon of Latin America" due to its dominant position in the region's e-commerce and fintech sectors [3] Recent Performance - MercadoLibre's stock recently declined following its November earnings report and concerns about Brazil's economy [3] Investment Opportunity - The recent decline in MercadoLibre's stock price is viewed as a significant investment opportunity, given the company's strong position in Latin America [3] Analyst Background - MMMT Wealth, run by Oliver, focuses on long-term investment strategies with a 3-5 year horizon, leveraging insights from investor calls, financials, and news [2] - Oliver has 5 years of investing experience and 4 years as a CPA, emphasizing thorough research to identify high-quality businesses [2]

Nvidia - Nvidia's stock is down more than 10% from its 2024 highs, making it an attractive buy [1] - The company's revenue grew by 94% year over year in the latest quarter, driven by its top-tier GPUs used for AI model training [1] - Nvidia trades at a P/E ratio of 51, which is not expensive compared to Apple (41) and Microsoft (36), especially considering its higher projected growth [2] - Wall Street analysts project 51% revenue growth for Nvidia in FY 2026 [3] Taiwan Semiconductor - TSMC's revenue rose 36% year over year in Q3, driven by its strong AI business, which is projected to triple this year [4] - Wall Street analysts expect TSMC's revenue to grow about 25% in 2025 [4] - TSMC trades at 31 times trailing earnings, cheaper than Apple and Microsoft, despite faster growth [5] - TSMC is a dominant chip manufacturer for companies like Nvidia and Apple, with the best chip foundries in the business [9] MercadoLibre - MercadoLibre is a Latin American e-commerce giant with a significant presence in fintech, often compared to Amazon combined with PayPal [6] - The company has sustained over 30% growth for a long time, with incredible results for shareholders [11] - MercadoLibre's revenue is projected to grow 24% in 2025, but it has struggled with bad debt in its fintech division, impacting profits [11] - The company trades at 61 times trailing earnings, but its forward P/E ratio of 38 for 2025 is more attractive [12] - MercadoLibre's operating revenue grew 35.27% year over year in the latest quarter, with TTM revenue reaching 18.49 billion [10]

Stock Performance - MercadoLibre Inc's stock experienced a significant drop following its earnings release in early November [1] - The stock recovered within three weeks but has since declined again to levels similar to those seen after the earnings release [1] Earnings Impact - The earnings release had a notable impact on MercadoLibre Inc's stock price, causing initial volatility [1] - Despite a temporary recovery, the stock has not sustained its upward momentum and has returned to post-earnings levels [1]

Group 1 - The article discusses the current market environment where many popular trading vehicles, such as cryptocurrencies and meme stocks, are not profitable businesses and lack prospects for future profitability [2] - The Cyclical Investor's Club focuses on investment strategies that are sensitive to economic and market cycles while aiming for long-term growth, which helps mitigate the risk of losses without compromising medium and long-term portfolio returns [2] Group 2 - The article emphasizes that past performance is not indicative of future results, and no specific investment recommendations are provided [3]

Core Viewpoint - MercadoLibre has significant growth potential compared to its e-commerce and fintech peers, driven by its established market position in Latin America and the ongoing expansion of the region's digital economy [1][2]. Company Growth - Founded in 1999, MercadoLibre has established a first mover's advantage in Latin America's fragmented e-commerce market by developing reliable logistics networks [3]. - The company operates in 18 countries, with the majority of its revenue generated from Brazil, Mexico, and Argentina [3]. - From 2013 to 2023, MercadoLibre's gross merchandise volume (GMV) grew at a compound annual growth rate (CAGR) of 20%, total payment volume (TPV) at a CAGR of 54%, and total revenue at a CAGR of 41% in USD terms [5]. Fintech Ecosystem - MercadoLibre has integrated its Mercado Pago digital payments platform into its business model, creating a fintech ecosystem that includes credit card services, lending, and cryptocurrency trading [4]. - The platform's stickiness has strengthened the company's competitive position against regional and international rivals [4]. Market Potential - The Latin American e-commerce market is projected to grow at a CAGR of 14.6% from 2024 to 2030, driven by increasing internet penetration and a shift from physical retail [6]. - Approximately 70% of Latin America's population remains unbanked, presenting a substantial opportunity for digital banking services, with the neobanking market expected to grow at a CAGR of 54.8% from 2023 to 2030 [7]. Financial Performance - MercadoLibre achieved profitability in 2021, with net income growing at a CAGR of 244% over the subsequent two years due to improved margins from economies of scale [8]. - Analysts forecast revenue and net income growth at CAGRs of 29% and 48%, respectively, from 2023 to 2026 [10]. Future Projections - If MercadoLibre continues to grow its earnings per share (EPS) at a CAGR of 25% over the next eight years, its stock price could potentially rise from approximately $1,900 to $15,200 [11]. - This growth could increase the company's market capitalization from $96 billion to about $768 billion, although it would still be smaller than Amazon's current valuation of $2.4 trillion [12]. Active User Base - As of the first nine months of 2024, MercadoLibre served 87 million active buyers and 56 million fintech monthly active users, indicating substantial room for growth within Latin America's population of over 660 million [9].