Companies that specialize in online sales or digital payments present exciting growth prospects for emerging market investors. MercadoLibre (MELI), an online marketplace company known as the eBay of Latin America, is at the forefront of both frontiers, explains Mike Cintolo, editor of Cabot Top Ten Trader.
With operations in 16 nations, the company has a user base 320 million strong and growing, making it one of Latin America’s most popular e-commerce sites.
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While it showed a net loss of $54 million in Q4 2019, MercadoLibre’s growth has been stellar, with net revenues rising 57% in the quarter, year over year.
Gross merchandise volume (a key metric for e-commerce companies) increased 20% to $3.9 billion in Q4, while the number of unique buyers continued to accelerate (+27%).
Significantly, the company has augmented its revenue stream by expanding into areas beyond e-commerce, including real estate and motor vehicle sales. But its online payment platform, MercadoPago, is by far the company’s crown jewel.
Created as a secure payment system to ease transactions on the MercadoLibre marketplace site, MercadoPago’s off-platform payments have drastically expanded in recent years, increasing 63% year over year in Q4 alone.
MercadoPago is also widely used as an off-platform and mobile point-of-sale payment vehicle, similar to PayPal. With Latin American online sales approaching tsunami-like volumes, MercadoLibre is on the leading edge of the wave.
After a 116% rally in the first seven months of 2019, MELI declined in the latter part of the year, providing some relief for the overheated stock.
A V-shaped bottom and reversal pattern was established last fall, with MELI hitting an all-time high last week. The stock tends to stay fairly close to its rising 25-day and 50-day lines, which is ideal. A position can be started here.
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