MercadoLibre (MELI) is an Argentine e-commerce company that is compared to Amazon and Alibaba with a market cap of $49 billion. Year to date, MELI stock is up more than 73%. We don’t typically cover Argentina stocks because there are only 17 Argentina ADRs (American Depositary Receipts) that trade on major U.S. stock exchanges, and most of them are either very small, wildly underperforming—or both.
MercadoLibre (MELI) stock is neither of those things.
Why is MercadoLibre Doing So Well?
For many of the same reasons Amazon.com (AMZN) and Alibaba (BABA) have. It’s an e-commerce giant that dominates the country in which it is headquartered. Actually, MercadoLibre dominates an entire continent, with the largest e-commerce and payments ecosystem in all of Latin America. MercadoLibre has a presence in 18 countries, including Argentina, Brazil, Chile, Colombia, Mexico, Peru and Venezuela. In each of those countries, it’s the market leader in terms of unique visitors and page views.
With both an online merchandising and a growing digital payments business, MercadoLibre is almost a hybrid between Amazon and eBay (EBAY) or PayPal (PYPL). As Argentina, and South America as a whole, waits out the virus at home like most of the rest of the world, business has picked up for MercadoLibre the way it has for Amazon and Alibaba.
Sales were up 37% in the first quarter, and are expected to improve 32% for the year. Though the company has struggled to maintain profitability (much like Amazon until the last few years), its losses are expected to narrow significantly this year.
The valuation is extremely rich, as MELI trades at 161 times forward earnings estimates and a whopping 2,900 times trailing earnings. But MELI stock has been expensive for a while, and that hasn’t stopped it from rising.
MELI is rising faster than both AMZN and BABA stock, and its business has way more upside: according to Statista, only about 5% of retail sales in Latin America were online last year, compared to 36% in China and 11% in the U.S. The market in which MercadoLibre operates is relatively untapped, despite the immense sales growth in recent years.
Thus, it’s reasonable to think MercadoLibre stock will continue to outperform AMZN and BABA, though the sky-high valuation is a bit concerning, and the beta is a touch higher than those other two stocks. I’d wait for a pullback closer to support in the mid-920s before buying (it currently trades at 994, a new all-time high). Long term, however, the trajectory is quite clear.
MELI is essentially a higher-risk, higher-reward version of Amazon or Alibaba. For the more adventurous investor, it’s worth adding to your portfolio once the share price comes down a bit more.