It has been about a month since the last earnings report for MercadoLibre (MELI). Shares have added about 3.7% in that time frame, underperforming 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 its most recent earnings report in order to get a better handle on the important drivers.
Mercadolibre's Q1 Earnings Beat Estimates
MercadoLibre reported first-quarter 2023 earnings of $3.97 per share, which surpassed the Zacks Consensus Estimate by 30.6%. Further, the figure reflects a significant jump from $1.30 in earnings per share reported in the year-ago quarter.
The company’s revenues jumped 35% on a year-over-year basis (58.4% on a FX-neutral basis) to $3.04 billion. The top line surpassed the Zacks Consensus Estimate of $2.88 billion.
The total revenues were driven by accelerating commerce and fintech revenues, which grew 31% and 40% year over year, respectively.
Increasing total payments volume (TPV), courtesy of the robust Mercado Pago, aided the company.
MercadoLibre’s rising gross merchandise volume (GMV) remained another positive. Strong shipment growth also contributed well to the reported results.
Additionally, solid momentum in Mercado Credito benefited the company. Further, increasing penetration of managed networks across the operating regions of the company was a tailwind.
Quarter in Detail
Brazil: Net revenues in the first quarter were $1.6 billion (52% of the total revenues), rising 26% year over year.
Argentina: The market generated revenues of $721 million (24% of the top line), which surged 39% year over year.
Mexico: Net revenues in the reported quarter were $591 million (19% of the total revenues), soaring 62% year over year.
Other countries: The markets generated revenues of $146 million (5% of the total revenues), increasing 28.1% on a year-over-year basis.
GMV of $9.4 billion jumped 23.1% and 43.3% on a reported and an FX-neutral basis, respectively, from the year-ago quarter.
The number of successful items sold was 309 million, up 15.7% year over year. The number of successful items shipped rose 18.9% year over year to 302 million.
TPV increased 46.1% and 80% year over year on a reported and an FX-neutral basis, respectively, to $36.99 billion. This was driven by the strong performance of Mercado Pago. Off-Marketplace TPV was above $27 billion, up 121% year over year on a FX-neutral basis.
Acquiring TPV, which includes on-platform, online payments, MPoS and QR payments, was $24.3 billion, up 40% year over year.
Also, $12.7 billion of digital accounts’ TPV, including wallet payments, P2P transfers between Mercado Pago accounts and card transactions, surged 61% year over year.
TPV on the marketplace was $9.95 billion, up 23.3% year over year. Total payment transactions increased by 71.9% year over year to 1.9 billion.
Unique active users totaled 101 million, up 24.7% year over year.
For the first quarter, the gross margin was 50.6%, expanding 290 basis points (bps) year over year.
Operating expenses were $1.2 billion, which increased 28.1% year over year. As a percentage of revenues, the figure contracted 210 bps from the year-ago quarter to 39.4% in the reported quarter.
The company reported $340 million of income from operations in the reported quarter, which rose 144.6% from the year-ago quarter. The operating margin was 11.2%, expanding 500 bps from the prior-year quarter.
As of Mar 31, 2023, cash and cash equivalents were $2.14 billion, up from $1.91 billion on Dec 31, 2022.
Short-term investments were $2.5 billion for the first quarter, up from $2.3 billion in the previous quarter.
Accounts receivable amounted to $132 million, up from $130 million in the fourth quarter.
How Have Estimates Been Moving Since Then?
It turns out, estimates revision have trended upward during the past month.
The consensus estimate has shifted 14.31% due to these changes.
Currently, MercadoLibre has a strong Growth Score of A, though it is lagging a lot on the Momentum Score front with a C. Charting a somewhat similar path, the stock was allocated a grade of D on the value side, putting it in the bottom 40% for this investment strategy.
Overall, the stock has an aggregate VGM Score of C. If you aren't focused on one strategy, this score is the one you should be interested in.
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.
Performance of an Industry Player
MercadoLibre is part of the Zacks Internet - Commerce industry. Over the past month, Match Group (MTCH), a stock from the same industry, has gained 13.2%. The company reported its results for the quarter ended March 2023 more than a month ago.
Match Group reported revenues of $787.12 million in the last reported quarter, representing a year-over-year change of -1.4%. EPS of $0.42 for the same period compares with $0.74 a year ago.
Match Group is expected to post earnings of $0.46 per share for the current quarter, representing a year-over-year change of -48.3%. Over the last 30 days, the Zacks Consensus Estimate has changed -4.4%.
Match Group has a Zacks Rank #3 (Hold) based on the overall direction and magnitude of estimate revisions. Additionally, the stock has a VGM Score of B.
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