By Sam Boughedda
Mercado Libre (NASDAQ:MELI) was reiterated with an Overweight rating and price target of $1,690 by Morgan Stanley Andrew Ruben on Friday.
Morgan Stanley analysts met with Mercado Libre management and said they came away from meetings seeing growth and monetization drivers for the company at a disconnect versus what's priced in.
"Macro pressures persist, but we see this being outweighed by company-specific drivers such as eCommerce share gain, ads/logistics uptake, and Fintech pricing," said Ruben.
The analyst said the company continues a balanced approach across growth, market share, and profitability. However, its tech headcount remains in focus, and they see other areas where the pace of spending could slow.
However, "MELI's over-arching message remains consistent, with the company targeting modest incremental profit growth on a y/y basis going forward."
"We see product & tech development remaining a key spending focus for MELI, consistent with the company's plan to hire 4,000 developers in 2022 (reaching 12,000). Conversely, amid a difficult backdrop for electronics sales, we see a path to lower investments around 1P merchandise, which have been a drag on gross margins," continued the analyst.
"With our '21-'23E algorithm for GMV (in USD) at a +23% CAGR, revenue +39%, and EBITDA +73%, we see a disconnect between fundamental trends and MELI's share price – at 17.5x' 23E EBITDA, we see a highly attractive risk-reward skew and reiterate OW."