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It has been about a month since the last earnings report for MercadoLibre, Inc. MELI. Shares have lost about 5.1% in that time frame.
Will the recent negative trend continue leading up to its next earnings release, or is MELI due for a breakout? 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 reported fourth-quarter 2017 non-GAAP earnings (adjusted for Venezuela operations) of 20 cents per share, which missed the Zacks Consensus Estimate by 35 cents. The figure plunged 68.2% sequentially and 82.7% year over year.
Revenues increased 17.8% sequentially and 70.5% on a year-over-year basis (99.6% on an FX neutral basis) to $437 million, which came ahead of Zacks Consensus estimate of $404.7 million. Excluding Venezuelan operations, the year-over-year growth would have been 75.3%.
Marketplace revenues grew 71.2% year over year (116.1% on an FX neutral basis), while non-marketplace revenues grew 69.5% (76.4% on an FX neutral basis).
Top-line growth was driven by strong performance across all geographies. This was attributed to investments in free shipping, loyalty and customer acquisition.
Transition from PC model to multi device model is another tailwind. Mobile devices contributed to 53% of the gross merchandise volume ("GMV") in the quarter.
Revenues in Detail
Brazil revenues were $262.1 million (almost 60% of total revenues), which were up 14.2% sequentially and 82.5% year over year. The growth was driven primarily by increase in the number of mobile point-of-sale devices sold in the market. Further, strong performance of MercadoEnvíos, which arranged shipment for 75.5% products sold in Brazil, also provided an impetus.
Argentina generated $108.7 million (24.9% of revenues), which grew 19.1% sequentially and 42.3% year over year.
Mexico garnered $28.2 million (6.5% of revenues), up 24.6% sequentially and a massive 135% year over year.
Venezuela revenues were almost $16 million (3.7% of revenues), up 63.3% sequentially and 49.5% year on year.
Other countries brought in $22.1 million (5.1% of total revenues), which grew 26.3% sequentially and 62.5% on a year-over-year basis.
The top-line growth in these regions was carried out by higher penetration of MercadoPago and MercadoEnvios. Colombia and Chile witnessed 81.8% and 75% year-over-year growth in MercadoPago adoption, respectively. Additionally, number of items shipped using MercadoEnvios grew 86.9% on a year-over-year basis to 48.3 million.
Total payment transactions through MercadoPago rose 72.2% year over year to 73.2 million. Also, the company witnessed a rising number of listings on the platform which grew 56% from the year-ago quarter.
Total confirmed registered users at the end of the quarter were 211.9 million, improving 5.3% sequentially and 21.7% year over year.
New confirmed registered users during the period were 10.7 million, increasing 7% sequentially and 36.2% on a year-over-year basis.
GMV of $3.6 billion increased 16% sequentially and 62.8% year over year (132.4% on an FX neutral basis).
Number of successful items sold was 81.2 million, up 9.4% sequentially and 57.5% year over year.
Number of successful items shipped increased 15.8% sequentially and 86.9% year over year to 48.3 million. The year-over-year surge was driven by growing penetration in free shipping and loyalty program.
Total payment volume was up 16.2% sequentially and 77.5% on a year-over-year basis to $4.3 billion (94.5% on an FX neutral basis).
Total volume of payments on marketplace was $3 billion up 15.3% sequentially and 70.9% year over year.
Total payments transactions saw sequential and year-over-year growth of 17.4% and 72.7% respectively, to 73.2 million.
Unique buyers grew 8.5% sequentially and 34.5% year over year to 17.7 million. Unique sellers were 4.6 million, flat sequentially but up 16.8% year over year.
Gross margin of 46.5% was down from 47.4% in the previous quarter and 63.5% in the year-ago quarter. This contraction was due to increased investments toward free shipping in across all the geographies.
Adjusted operating expenses came in $182.2 million (41.6% of total revenues), reflecting an increase of 22.8% sequentially and 85.7% year over year.
The company reported operating loss of $64.6 million as against $27.5 million and $64.7 million gain from operations in the previous and year-ago quarter, respectively. Loss was incurred due to Venezuela operations. Excluding this effect, the company would have reported $12.7 million of operating income in the quarter.
As of Dec 31, 2017, cash and cash equivalents were $388.2 million, compared with $461.2 million as of Sep 30, 2017.
Cash from operations was $269 million in the fourth quarter compared with $242.4 million in the previous quarter. The company does not have any long-term debt.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed a downward trend in fresh estimates. There have been two revisions lower for the current quarter.
MercadoLibre, Inc. Price and Consensus
MercadoLibre, Inc. Price and Consensus | MercadoLibre, Inc. Quote
At this time, MELI has a subpar Growth Score of D. Its Momentum is doing a lot better with a B. The stock was allocated a grade of F on the value side, putting it in the fifth quintile for this investment strategy.
Overall, the stock has an aggregate VGM Score of D. If you aren't focused on one strategy, this score is the one you should be interested in.
The company's stock is suitable solely for momentum based on our styles scores.
Estimates have been broadly trending downward for the stock and the magnitude of these revisions indicates a downward shift. Notably, MELI has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.
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