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Why MercadoLibre Stock Popped 14.5% in November

By Joe Tenebruso - Dec 11, 2017 at 10:31AM

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The Latin American e-commerce star showed that it's not going to give up market share without a fight.

What happened

Shares of MercadoLibre (MELI 5.84%) jumped nearly 15% last month, according to data provided by S&P Global Market Intelligence. The dominant e-commerce platform in Latin America delivered solid third-quarter results, which helped to assuage fears that (AMZN 3.58%) was about to eat its lunch.

So what

Coming into November, MercadoLibre's stock was reeling following a report that online retail titan was preparing to expand its operations in Brazil. Analysts warned that Amazon's entry would pressure MercadoLibre's margins and gross merchandise volume and ultimately lead to a loss of market share for the Latin American e-commerce leader.

However, MercadoLibre's third-quarter results helped to lessen those concerns. Its revenue surged more than 60% to $370.7 million, which was well above Wall Street's expectations for $347.7 million. Its earnings per share declined 28% to $0.63 -- mainly due to the company's investments in expanding its free shipping offerings -- but that also topped analysts' estimates. Most importantly, MercadoLibre displayed strength across its key metrics, including registered users (up 21% year over year), items sold (up 56%), and payment transactions (up 69%).

A boxer with his gloves up

MercadoLibre is not going down without a fight. Image source: Getty Images.

Now what 

Amazon is certainly not a threat to be taken lightly. With its "your margin is my opportunity" philosophy, the online retail juggernaut is notorious for disrupting new markets -- and putting immense pressure on incumbents' profits in the process.

Still, e-commerce is a huge and rapidly growing industry. Plus, internet penetration rates remain relatively low in many of MercadoLibre's core markets. In fact, only about 60% of the more than 600 million people in Latin America currently use the internet. Contrast that with the 90% rates seen in North America, and you can begin to see just how early e-commerce is in its growth cycle in Latin America. This is a potentially massive market -- one that's likely to be large enough for more than one winner. Thus, it's possible that Amazon and MercadoLibre can both thrive in this fertile ground in the years ahead.

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Stocks Mentioned

Mercadolibre, Inc. Stock Quote
Mercadolibre, Inc.
$739.46 (5.84%) $40.82, Inc. Stock Quote, Inc.
$116.46 (3.58%) $4.02

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