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MercadoLibre's (MELI) Q2 Earnings Beat, Revenues Up Y/Y

Zacks Equity Research
·6 min read

MercadoLibre, Inc. MELI reported second-quarter 2020earnings of $1.11 per share, beating the Zacks Consensus Estimate of 10 cents. Further, the bottom line improved 258.1% from the year-ago quarter. Notably, the company reported a loss of 44 cents per share in the previous quarter.

Revenues surged 61.1% on a year-over-year basis (123.4% on an FX neutral basis) to $878.4 million. Moreover, the figure surpassed the Zacks Consensus Estimate of $790.8 million.

The top line was driven by accelerating commerce and fintech revenues, which grew 79.5% and 34.1% year over year, respectively.

Moreover, increasing total payments volume (TPV) courtesy of robust Mercado Pago and mobile-point-of-sale (MPOS) business remained a major positive. Moreover, solid TPV growth via Mobile Wallet contributed to the results.

Additionally, increasing traffic and engagement rate by buyers on the company’s online retail platform was a major positive. This increase can be attributed to boom in e-commerce space owing to the coronavirus-induced social distancing and stay-at-home restrictions.

Further, the company’s rising gross merchandise volume (GMV), courtesy of accelerating mobile GMV, which contributed 69.4% to total GMV. Further, mobile GMV soared 272.8% year over year.

Also, strong momentum across free shipment program led to robust shipments growth via Mercado Envios during the reported quarter. Growing penetration of managed networks was also a tailwind.

Coming to the price performance, MercadoLibre has returned 95.6% on year-to-date basis, outperforming the industry’s rally of 51.9%.

Quarter in Detail

Brazil: Net revenues in the second quarter were $465.3 million (52.9% of total revenues), up 37% year over year. This can be attributed to GMV in the country, which improved 58% year over year, courtesy of growing number of items sold in this region. Notably, the company witnessed growing penetration of its fast delivery services especially same day deliveries in the country, which contributed to the results.

Argentina: This market generated revenues of $239.2 million (27.2% of revenues), which soared 110% year over year. The company witnessed solid growth in GMV in this country, which skyrocketed 230% year over year on account of robust marketing campaigns. Accelerating off-platform TPV contributed significantly to the company’s top line in this particular country during the reported quarter.

Mexico: Net revenues in the reported quarter were $125.9 million (14.4% of revenues), up 96% year over year. This primarily came on the back of robust GMV, which improved 122% from the prior-year quarter.

Other countries: These markets generated revenues of $47.9 million (5.5% of total revenues), climbing 83.7% on a year-over-year basis. Notably, the combined GMV of Colombia and Chile surged 200% from the year-ago quarter.

Key Metrics

GMV of $5.04billion improved 48.5% year over year and 101.5% on FX neutral basis.

New confirmed registered users during the period were 16.9 million, increasing 36.3% on a year-over-year basis.

Number of successful items sold was 178.5million, up 101.2% year over year. Moreover, number of successful items shipped surged 124.4% year over year to 157.5 million. This can be attributed to strong performance of Mercado Envios and optimization strategies for the company’s free shipping program.

Total payment volume (TPV) was up 72.1% on a year-over-year basis to $11.2billion, driven by strong performance of MercadoPago. Further, off-platform payments volume (online-to-offline) that grew 92.1% from the year-ago quarter remained positive.

Additionally, MPOS business witnessed TPV growth of 80.1% year over year. Further, rapid adoption of MercadoLibre’s Mobile Wallet generated $2.1billion in transactions, up 373.2% year over year. Further, user base of mobile wallet climbed 109.3% from the year-ago quarter.

TPV on marketplace was $4.8 billion, up 52.7% year over year. Further, total payments transactions increased 122.9% year over year to 404.8 million.

MercadoLibre, Inc. Price, Consensus and EPS Surprise

MercadoLibre, Inc. Price, Consensus and EPS Surprise
MercadoLibre, Inc. Price, Consensus and EPS Surprise

MercadoLibre, Inc. price-consensus-eps-surprise-chart | MercadoLibre, Inc. Quote

Unique active users totaled 51.5 million, up 45.1% year over year.

Operating Details

For the second quarter, gross margin was 48.6%, contracting 140 basis points (bps) year over year. This can be attributed to rising warehousing and fulfilment costs.

Operating expenses as a percentage of total revenues were 37.3%, contracting significantly from 52.3% in the prior-year quarter.

The company generated $99.4 million of income from operations in the second quarter, against the year-ago quarter’s loss of $12.5 million.

Balance Sheet

As of Jun 30, 2020, cash and cash equivalents were $1.2 billion compared with $1.1 billion as of Mar 31, 2020.

Short-term investments were $2.1 billion in the second quarter compared with $1.6 billion in the previous quarter.

Accounts receivable amounted to $42.4 million, up from $34.1 million in the first quarter. Further, inventory at the end of the second quarter was $20.8 million, up from $12.1 million at the end of prior quarter.

Zacks Rank & Other Key Picks

MercadoLibre currently has a Zacks Rank #2 (Buy).

Some other top-ranked stocks in the retail-wholesale sector are JD.com, Inc. JD, Dollar General Corporation DG and Wayfair Inc. W. While JD.com sports a Zacks Rank #1 (Strong Buy), Wayfair and Dollar General carry a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Long-term earnings growth rate for JD.com, Wayfair and Dollar General is currently pegged at 46.79%, 23.04% and 12.5%, respectively.

Zacks’ Single Best Pick to Double

From thousands of stocks, 5 Zacks experts each picked their favorite to gain +100% or more in months to come. From those 5, Zacks Director of Research, SherazMian hand-picks one to have the most explosive upside of all.

With users in 180 countries and soaring revenues, it’s set to thrive on remote working long after the pandemic ends. No wonder it recently offered a stunning $600 million stock buy-back plan.

The sky’s the limit for this emerging tech giant. And the earlier you get in, the greater your potential gain.

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