MercadoLibre (NASDAQ:MELI) stock has gained renewed confidence from Wall Street, with firms like Morgan Stanley and Bank of America raising their price targets to new Street highs.
Analysts at Morgan Stanley noted that the stock is currently trading close to its historical highs, however, they see further upside driven by four key catalysts related to gross merchandise value (GMV), ads, credit, and Argentina.
The bank hiked its price target on the stock from $2,175 to $2,500, implying more than 18% upside from current levels.
MELI shares rose more than 1% in premarket trading Friday.
The investment firm highlighted MercadoLibre's GMV growth, particularly in Brazil, where the company saw a 33% increase in the first half of 2024, outpacing competitors such as Magazine Luiza and Casas Bahia.
The performance is attributed to MercadoLibre's investments in logistics, fintech, and platform enhancements, which are believed to be key drivers of the digital commerce shift within Latin America.
Projections suggest that the industry's growth rates for Brazil and Mexico could converge with MercadoLibre's GMV growth rates, potentially indicating conservative share gain deceleration, especially in Brazil.
The firm also sees a growth runway for Mercado Ads, MercadoLibre's advertising business. With advertising revenue accounting for a small portion of consolidated GMV last year, there is significant room for expansion. The partnership with Disney, where MercadoLibre will serve ads within Disney+, is seen as a positive development.
MercadoLibre's credit portfolio, Mercado Credito, is another area of expansion, with new products and entry into new markets like Mexico.
Despite a slowdown in growth in 2023, the portfolio saw a rebound in the first half of 2024. The company's ambitions in Mexico, including applying for a banking license and securing additional funding, indicate a broader vision that could lead to a more significant role in digital banking in the region.
Lastly, in Argentina, despite economic challenges, MercadoLibre has managed to return to growth in items sold faster than initially forecasted.
The country still represents a significant portion of the company's earnings before interest and taxes (EBIT).
While there is a tough comparison base for the second half, the firm remains comfortable with its base case estimates for Argentina, considering the potential positive impact of any macroeconomic or foreign exchange normalization on MercadoLibre's operations in the country.
Separately, analysts at Bank of America also hiked their price target on MELI stock from $2,250 to $2,500 “to reflect GMV & credit use.”
“We suggest considerable earnings power across ads, logistics, lending, and wallet funding capable of lifting earnings,” analysts noted.