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MercadoLibre (MELI) Up 8.1% Since Last Earnings Report: Can It Continue?

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A month has gone by since the last earnings report for MercadoLibre (MELI). Shares have added about 8.1% in that time frame, outperforming the S&P 500.

Will the recent positive trend continue leading up to its next earnings release, or is MercadoLibre due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important catalysts.

MercadoLibre's Q2 Earnings Top Estimates

MercadoLibre reported second-quarter 2021 earnings of $1.37 per share, which beat the Zacks Consensus Estimate of 9 cents. Further, the figure rose 23.4% year over year. It compares favorably with a loss of 44 cents per share in the prior quarter.

Its revenues surged 93.9% on a year-over-year basis (102.6% on an FX-neutral basis) to $1.7 billion. Further, the top line surpassed the Zacks Consensus Estimate of $1.5 billion.

Revenues were driven by accelerating commerce and fintech revenues, which grew 96.4% and 88.9% year over year to $1.14 billion and $560.4 million, respectively.

Increasing total payments volume (TPV), courtesy of a robust Mercado Pago and the mobile-point-of-sale (MPOS) business, aided the company. A solid momentum across Mobile Wallet benefited the results.

The company’s rising gross merchandise volume (GMV), owing to increasing mobile GMV, remained another positive.

Strong shipment growth on MercadoEnvios and the growing penetration of managed networks in the reported quarter was a tailwind.

Strengthening momentum across Mercado Fondo and Mercado Credito also benefited the company.

Quarter in Detail

Brazil: Net revenues in the second quarter were $951.1 million (55.9% of total revenues), soaring104% year over year.

Argentina: The market generated revenues of $366.1 million (21.5% of the top line), which rose53% year over year.

Mexico: Net revenues in the reported quarter were $258.1 million (15.1% of revenues), soaring105% year over year.

Other countries: The markets generated revenues of $127.5 million (7.5% of total revenues), climbing 166.1% on a year-over-year basis.

Key Metrics

GMV of $7billion jumped 39.2% and 46.1% on a reported basis and a FX-neutral basis, respectively, from the year-ago quarter. Notably, mobile GMV accounted for 73.4% of the total GMV. Mobile GMV surged 218.2% year over year.

The number of successful items sold was 244.6million, up 37% year over year. The number of successful items shipped rose46.4% year over year to 230.5million. This can be attributed to the sturdy performance of MercadoEnvios.

TPV increased 56.3% and 72.2% year over year on a reported basis and a FX-neutral basis, respectively, to $17.5billion. This was driven by the strong performance of MercadoPago. Off-platform payment volume (online-to-offline) was $10.3 billion, up 70.5% from the year-ago quarter.

The MPOS business witnessed year-over-year TPV growth of 93.7%.The rapid adoption of MercadoLibre’s Mobile Wallet TPV grew106.5% year over year.

TPV on marketplace was $6.8 billion, up 42.2% year over year. Total payment transactions skyrocketed 80.3% year over year to 729.9 million.

Unique active users totaled 75.9 million, up 47.4% year over year.

Operating Details

For the second quarter, the gross margin was 44.3%, contracting 430 basis points year over year.

Operating expenses were $587.8 million, which increased 79.3% year over year. However, as a percentage of revenues, the figure contracted 280 bps from the year-ago quarter to 34.5% in the reported quarter.

The company reported $166.2 million of income from operations in the second quarter, up 67.2% year over year. Operating margin was 9.8%, which contracted 150 bps year over year.

Balance Sheet

As of Jun 30, 2021, cash and cash equivalents were $1.1 billion, up from $862.7 million as of Mar 31, 2021.

Short-term investments were $898.4 million in the second quarter, down from $980.1 millionin the previous quarter.

Accounts receivable amounted to $69.8 million, up from $64.8 million in the first quarter. The inventory level at the end of the second quarter was $169.4 million, up from $131.5 million at the end of the prior quarter.

How Have Estimates Been Moving Since Then?

In the past month, investors have witnessed an upward trend in fresh estimates. The consensus estimate has shifted 1593.33% due to these changes.

VGM Scores

At this time, MercadoLibre has a great Growth Score of A, though it is lagging a lot on the Momentum Score front with a D. Charting a somewhat similar path, the stock was allocated a grade of F on the value side, putting it in the bottom 20% quintile for this investment strategy.

Overall, the stock has an aggregate VGM Score of F. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

Estimates have been trending upward for the stock, and the magnitude of these revisions looks promising. It comes with little surprise MercadoLibre has a Zacks Rank #1 (Strong Buy). We expect an above average return from the stock in the next few months.


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