Is It Time to Buy MercadoLibre Stock?

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].