Argentinian e-commerce and fintech giant MercadoLibre Inc. (NASDAQ:MELI) reported impressive sales improvements and net income margins in its fiscal results for the first quarter of the year. This is the latest sign that the Latin American firm, which celebrates 25 years of business this year, still has ample room for growth by being well-positioned to capitalize on broader trends in the region. MercadoLibre has both a massive pre-existing footprint across South America and the capacity to dominate in new markets.
These are some of the reasons why analysts across Wall Street remain optimistic about MELI, even as shares have roughly doubled in the last four years. I agree with this sentiment. Below, we’ll explore some of the factors impacting MercadoLibre’s recent rapid growth and see how they may continue to fuel the company in the near term.
Multi-Year History of Rapid Growth
MercadoLibre’s gross merchandise volume, a measure of the total value of merchandise sold, increased at a compound annual growth rate (CAGR) of 20% from 2013 to 2023. This is an impressive figure on its own, but it is eclipsed by its total payment volume and total revenue, which climbed at CAGRs of 54% and 41%, respectively, over the same period.
What has fueled such consistent and significant growth? MercadoLibre has made rapid inroads across well over a dozen countries in Latin America, particularly with its Mercado Pago payments platform. The company has also scaled its online marketplace considerably in the last decade.
Speedy expansion in both of these areas has helped the firm not only to tap into growing markets as more customers look to payment services and online shopping, but it has also been a barrier to smaller upstart companies that do not enjoy the same positioning or history.
Still, MercadoLibre’s core business is centered in Brazil, Argentina, and Mexico. In the most recent quarter, gross merchandise volume increased by 30% year-over-year in both Brazil and Mexico. And there is still plenty of room for expansion in these key markets: MercadoLibre reported that unique active buyers in the Brazilian and Mexican markets climbed by 18% and 25% year-over-year, respectively.
Recent Revenue Gains Continue the Trend
With these factors in mind, it’s little surprise that MercadoLibre’s top- and bottom-line growth have continued apace in recent months. In the first quarter of the year, the company posted net revenues of $4.3 billion, a 36% increase over the prior-year quarter. Income from operations came in at $528 million for the quarter, an improvement of 26% year-over-year.
E-commerce and digital payments growth also continued in the early months of 2024. MercadoLibre said that gross merchandise volume was up 71% on a constant-currency basis and that total payment volume was up 86% in constant currency.
MELI+ Loyalty Program Gains Traction
Another factor helping drive recent gains is the company’s MELI+ loyalty program. This program is akin to Amazon’s (NASDAQ:AMZN) Prime membership feature, providing users with perks like free shipping and access to streaming content.
Although MercadoLibre did not provide MELI+ membership figures in its first-quarter earnings report, the firm stated, “Users who enroll in the program increase their spending and buying frequency and shop across more categories than prior to enrollment.” The firm also said that engagement with its MELI Delivery Day event exceeded expectations.
Market Continues to Grow
Despite MercadoLibre’s rapid rise in recent years, analysts suspect there is still more room for growth, thanks to the burgeoning Latin American market. Mordor Intelligence expects that the Latin American e-commerce market will expand at a CAGR of 19% from 2023 through 2028. Given this market opportunity, it’s understandable why analysts favor MELI as a key contender to capture a significant portion of this new business.
Is MELI Stock a Buy, According to Analysts?
MELI shares have climbed by 29% in the past year and are trading at around $1,600/share. Despite this lofty price tag, analysts across Wall Street still anticipate that shares could trend higher. The average MELI stock price target of $1,899.00 represents upside potential of 18.6%. MELI enjoys a Strong Buy rating based on 11 Buys, two Holds, and zero Sells.
The Takeaway: MELI Has More Room for Growth
In the last several years, MercadoLibre has positioned itself as a key e-commerce and fintech leader in the growing Latin American market. From its core markets of Mexico, Brazil, and Argentina, the firm has expanded operations at a rapid pace, and metrics, including revenue and gross merchandise volume, have grown to match.
This momentum shows no sign of stopping as the company continues to capitalize on the region’s large-scale shift toward e-commerce, payment services, and similar offerings. For these reasons, investors looking to engage with this market would do well to keep MercadoLibre in mind.
