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Why MercadoLibre Stock Sank Today
MELIMercadoLibre(MELI) The Motley Fool·2024-11-07 19:07

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 5.3billion,representinga355.3 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′sExplanation−Managementaddressedinvestorconcernsbyexplainingthatmargincontractionwasduetoincreasedinvestmentsincreditcardusageandlogisticsservices,whichrequiredsettingasidemorefundsforpotentiallosses[3].−Investmentsininfrastructurewerealsohighlightedasacostfactorimpactingmargins[3].InvestorSentiment−Despitemanagement′sexplanations,investordissatisfactionwasevidentinthestockpricereaction[4].−Thecompanystillgeneratednearly10 [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].