Let me see how well I can read you. You're a fan of eBay (Nasdaq: EBAY ) , but after watching auction listings slip in recent quarters, you're concerned that the company's run as a growth stock is peaking. You thought you'd found a sizzling substitute in South Korea's Gmarket (Nasdaq: GMKT ) , but last week's disappointing report still has you smarting. 7% profit growth? You've got to be kidding me, Gmarket.
Baidu.com (Nasdaq: BIDU ) has plans to launch an auction site in China next year. But Taobao is so entrenched in that market that even eBay bowed out humbled, its tail between its legs.
Where in the world is Carmen San Diegrowth? South America, my friend. MercadoLibre (Nasdaq: MELI ) achieved the kind of marketplace mojo that eBay and Gmarket last saw years ago.
Third-quarter revenue soared 72% to $22.8 million. Earnings of $0.07 a share reversed a small loss a year earlier. Analysts were taking a siesta, expecting a profit of $0.06 a share on just $20.7 million in revenue.
Like eBay, MercadoLibre's growing more quickly on its payment-processing side than on its flagship auction business. But eBay is really MercadoLibre in slow motion there. During the quarter, MercadoLibre's marketplace revenue rose by 61%, as its MercadoPago arm surged 142%.
This doesn't mean that eBay isn't benefiting from MercadoLibre's growth. It's a partner, just as Yahoo! (Nasdaq: YHOO ) has snapped up interests in Taobao and Gmarket. However, eBay still has to be a little jealous.
It's ultimately vindication for MercadoLibre's early believers. And you don't have to go too far back to get that reunion going. The company went public just three months ago at $18 a share. It wasn't necessarily a scorcher out of the gate, with the first trade coming through at $22. The stock has gone on to nearly double since then.
Sure, MercadoLibre isn't exactly cheap. It's fetching 216 times this year's profit target and 87 times next year's bottom-line projection. However, the disparity between the two numbers tells you all you need to know about the company's torrid growth. With earnings poised to soar by 147% next year, 87 times forward profitability isn't an outlandish sum for a company that's just starting to grow in its core Argentinean and Brazilian markets, even as it expands into neighboring countries.
A growth stock? The antidote to the auction-marketplace doldrums? It's not always easy to find on the map, but it's there in abundance at MercadoLibre.
Bill Mann and his Motley Fool Global Gains team are heading to South America in 10 days to learn more about promising international investment opportunities. MercadoLibre is the first stop on Day One in Buenos Aires. Get the team's report from the visit and the rest of their research live from the field by providing your email in the field below.
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