BTIG has updated its outlook on shares of MercadoLibre (NASDAQ: NASDAQ:MELI), increasing the price target to $2,250 from the previous $2,025 while maintaining a Buy rating on the stock.
The firm highlighted MercadoLibre's strong performance in Brazil during the second quarter, noting its significant market share gains in both the e-commerce and fintech sectors.
MercadoLibre achieved a 36% growth in gross merchandise volume (GMV) in local currency terms in Brazil, which is estimated to be three times higher than the rest of the market's growth.
Consequently, the company's e-commerce market share in Brazil has risen to 41.1%, marking a 0.5% increase from the previous quarter and a 4.7% increase year over year. This indicates that MercadoLibre captured nearly two-thirds of every incremental dollar spent in Brazil's e-commerce sector, outperforming its overall market share.
BTIG also noted that despite mixed macroeconomic conditions in Latin America, the positive trends in real wages in Brazil, Mexico, and Argentina, along with strong digitalization trends, support a bullish stance on MercadoLibre. In addition, the firm pointed out that e-commerce remained robust in Brazil in June and July, according to data from Cielo.
The revised price target is also supported by updated financial estimates, with BTIG raising its FY24/FY25 GMV forecasts to $50.6 billion and $56.7 billion, up from $50.5 billion and $54.7 billion, respectively. The firm's new EPS estimates for FY24/FY25 are $39.24 and $47.58, up from $37.12 and $42.49. The price target of $2,250 is based on a 36x multiple of the firm's FY26 EPS estimate, which represents approximately a 15% discount to MercadoLibre's current forward P/E multiple of 42x.
In other recent news, MercadoLibre has demonstrated a strong performance in the second quarter of 2024, with a significant 40% year-over-year increase in revenues, reaching $5.1 billion.
The company's net income margin also hit a notable 10.5%, the highest in eight years. Growth was particularly strong in Brazil and Argentina for Commerce, and Fintech Services saw a surge in monthly active users, surpassing 50 million. MercadoLibre also issued 1.6 million new credit cards during the quarter.
Despite a contraction in EBIT margins due to bad debt provisioning, the company reported market share gains in Brazil and Mexico, and positive results from its credit card business and AI implementation in advertising. The company remains optimistic about future growth, focusing on strategic initiatives to fuel further expansion, including investments in logistics and a new fulfillment center in Texas.
InvestingPro Insights
Adding to BTIG's optimistic outlook, InvestingPro data indicates that MercadoLibre holds a robust market capitalization of $101.68 billion, reflecting its significant presence in the e-commerce and fintech sectors. The company's impressive revenue growth over the last twelve months, reaching 37.27%, further underscores its rapid expansion and ability to capture market share. Moreover, MercadoLibre's gross profit margin stands at a healthy 54.7%, showcasing the company's efficiency and strong operational performance in a competitive landscape.
InvestingPro Tips highlight MercadoLibre's financial health, with the company holding more cash than debt, which is a positive sign for investors looking for a stable investment. Additionally, the company's stock is currently trading at a high earnings multiple, which could indicate market confidence in its growth prospects, although it is something that investors should keep an eye on considering the stock's volatility. For those seeking more comprehensive analysis, InvestingPro offers a total of 19 additional tips for MercadoLibre, available through their platform.
These insights, coupled with the fact that analysts have recently revised their earnings upwards for the upcoming period, suggest that MercadoLibre is well-positioned to maintain its growth trajectory. As such, investors may find MercadoLibre to be an attractive option for their portfolios, reflecting the company's strong fundamentals and the positive market sentiment surrounding it.
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