After the market closed last Wednesday, MercadoLibre (NASDAQ: MELI) reported on its second quarter, and on Thursday, Wall Street gave its verdict by boosting the company's share price by 11%.
In this segment from MarketFoolery, host Mac Greer and senior analyst Jim Mueller discuss the impressive numbers from the Amazon.com of Latin America -- and let's not forget it's also the PayPal and Square of Latin America -- as well as some of the headwinds it faces.
To catch full episodes of all The Motley Fool's free podcasts, check out our podcast center. A full transcript follows the video.
This video was recorded on Aug. 8, 2019.
Mac Greer: Good day for MercadoLibre and MercadoLibre shareholders. The Latin America e-commerce giant up 11% on better-than-expected earnings. Now, Jim, their marketplace business is growing, as is the payments business.
Jim Mueller: Yep, and as is their mobile point-of-sale business, which is what Square started off, with those little dongles you can plug into your iPhone or Android phone. It's common to call MercadoLibre the eBay or Amazon of Latin America, but with its payments business, it's like PayPal that way, and it's just like Square with its mobile payment point of sale of business. And all three of them are growing like crazy. This company is insane in its growth. Sixty-three percent net revenue growth. One hundred percent if you take out the effect of currency fluctuations. One hundred percent net revenue growth year over year. That's crazy. Gross profit margins are about 50%, which is up from a year ago, a little under 48%. Unfortunately, this quarter, operating expenses were 52% of revenues, so they showed an operating loss. But operating expenses went in the right direction -- down from last year, where it was 56% of revenues.
The company has been very profitable in the past. They've really grown in the last year or two, which was, I believe, what has caused them to pull back on their profitability. But they're pumping out the cash that they can reinvest in the business. I have nothing but admiration for what they're doing, and love the company, and I'm glad I own shares today.
Greer: I do not own shares. Dang it!
John Mackey, CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool's board of directors. Jim Mueller, CFA owns shares of AMZN, MercadoLibre, PYPL, and SQ and has the following options: long January 2020 $1370 calls on AMZN, short January 2020 $1380 calls on AMZN, short September 2019 $540 puts on MercadoLibre, short October 2019 $110 puts on PYPL, short January 2020 $82.50 puts on PYPL, and short September 2019 $65 puts on SQ. Mac Greer owns shares of AMZN, MercadoLibre, and SQ. The Motley Fool owns shares of and recommends AMZN, MercadoLibre, PYPL, and SQ. The Motley Fool has the following options: short October 2019 $37 calls on EBAY, long January 2021 $18 calls on EBAY, short October 2019 $97 calls on PYPL, and short September 2019 $70 puts on SQ. The Motley Fool recommends EBAY. The Motley Fool has a disclosure policy.
This article was originally published on Fool.com