MercadoLibre's Best Growth Opportunities

Next Monday, MercadoLibre (NASDAQ: MELI  ) will release its latest quarterly results. The key to making smart investment decisions on stocks reporting earnings is to anticipate how they'll do before they announce results, leaving you fully prepared to respond quickly to whatever inevitable surprises arise. That way, you'll be less likely to make an uninformed kneejerk reaction to news that turns out to be exactly the wrong move.

Latin America has been a huge growth center over the past decade, and MercadoLibre has tapped into the rise of the consumer middle-class with its online marketplace and payment services businesses. Yet, as emerging markets slow down, how will the company keep growing? Let's take an early look at what's been happening with MercadoLibre over the past quarter and what we're likely to see in its quarterly report.

Stats on MercadoLibre

 

 

Analyst EPS Estimate

$0.54

Change From Year-Ago EPS

20%

Revenue Estimate

$97.44 million

Change From Year-Ago Revenue

16.4%

Earnings Beats in Past 4 Quarters

2

Source: Yahoo! Finance.

Will MercadoLibre bid higher?
In recent months, analysts haven't been as optimistic about MercadoLibre's earnings prospects. They chopped a nickel per share from their first-quarter estimates, and carried most of that reduction through to their full-year 2013 estimates, as well. Yet, that pessimism hasn't been reflected in the stock's price, which has climbed 12% since late January.

MercadoLibre closely resembles U.S. counterpart eBay (NASDAQ: EBAY  ) in many ways, not the least of which has been its evolution from an online auction site to a combination marketplace and payment-management business. eBay's PayPal has become a huge part of its overall corporate footprint and, arguably, has stronger growth potential than the namesake auction business. MercadoLibre, however, has even greater growth prospects given the slower pace of advancing e-commerce and payment solutions in Latin America thus far.

Moreover, MercadoLibre benefits further from the fact that it has a much stronger competitive position in its market than eBay does domestically. In particular, Amazon.com (NASDAQ: AMZN  ) has much lower penetration rates in Latin America, with recent estimates suggesting that MercadoLibre has roughly triple the traffic of Amazon there.

But one piece of bad news for MercadoLibre came in February, when Venezuela devalued its currency. Venezuela is the third largest market for the online marketplace provider, and although its losses won't be as extensive as those that some consumer giants serving the region had to deal with, MercadoLibre can't afford to lose such an important market, even as its economy faces a potential upheaval.

In MercadoLibre's quarterly report, look at how the company plans to continue implementing its two-pronged strategic vision. Here in the U.S., Amazon and eBay have fought largely on the marketplace side, although Amazon has started looking into payment solutions. With MercadoLibre in the lead, it may choose a different path toward success.

Amazon faces an unusual position in Latin America, where it isn't the leader. Find out more about the company in The Motley Fool's premium report, which will tell you what's driving the company's growth, and fill you in on reasons to buy and reasons to sell Amazon. The report also has you covered with a full year of free analyst updates to keep you informed as the company's story changes, so click here now to read more.

Click here to add MercadoLibre to My Watchlist, which can find all of our Foolish analysis on it and all your other stocks.


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