Why MercadoLibre Shares Plunged

Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.

What: Shares of South American online auction operator MercadoLibre (Nasdaq: MELI  ) sank 12% on Wednesday after its quarterly results disappointed Wall Street.

So what: While MercadoLibre's first-quarter miss wasn't all that bad (EPS of $0.45 on revenue of $83.7 million versus the consensus of $0.45 and $84.3 million), investors seem worried that it's a sign of even bigger disappointments down the road. The company continues to grow nicely, but today's results suggest that it isn't growing fast enough to justify its particularly lofty P/E.  

Now what: Long-term-growth seekers should look into this plunge as a possible entry point. "I look forward to the rest of 2012, as we keep driving innovation on top of the success of our current initiatives, with the goal of delivering sustained top and bottom line growth during 2012," said CEO Marcos Galperin. Investors often do well by pouncing on short-term hiccups from potent global growth stories, and today's drop might be providing that opportunity.

Interested in more info on MercadoLibre? Add it to your watchlist.

Fool contributor Brian Pacampara owns no position in any of the companies mentioned. The Motley Fool owns shares of MercadoLibre. Motley Fool newsletter services have recommended buying shares of MercadoLibre. Try any of our Foolish newsletter services free for 30 days.

We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Fool's disclosure policy always gets a perfect score.

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  • Report this Comment On May 09, 2012, at 7:43 PM, bkmfcc wrote:

    Yes this wouldn't be a bad entry point. But you recommended MELI a few days ago on Supernova when it was close to a 100. Those of us fools who bought then may not have the money to enter here!

    Thanks a lot for that advice!!

  • Report this Comment On May 10, 2012, at 12:36 PM, xbmwfan wrote:

    What happened to Mako? Any details of what drew such a drop.

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