Please ensure Javascript is enabled for purposes of website accessibility

MercadoLibre Stock: Next Stop, $330?

By Rick Munarriz - Dec 13, 2017 at 10:02AM

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

Piper Jaffray sees one of this year's hottest stocks continuing to light it up in 2018.

Shares of MercadoLibre (MELI -3.52%) hit another all-time high on Tuesday, and at least one Wall Street pro sees the Latin American online marketplace speedster going even higher. Piper Jaffray analyst Michael Olson is boosting his price target on the stock from $268 to $330, a move likely to lead to even higher highs as MercadoLibre barrels through the $300 mark.

Olson remains confident in the dot-com darling's improving fundamentals, even arguing that the stock remains relatively inexpensive despite nearly doubling this year. MercadoLibre stock has soared 89% in 2017 through Tuesday's close. Naturally, Olson is sticking to his overweight rating on the shares.

A MercadoLibre logo in a heart at a developers conference.

Image source: MercadoLibre.

Making the grade 

Olson's encouraging price target boost matters. Less than two months ago, he was lowering his price goal from $287 to $268. His channel checks were showing decelerating listings growth for MercadoLibre's third quarter, and he went on to lower his estimates in light of the company's increased marketing push and the impact of free shipping. 

This cautious stance proved to be the wrong place to be, as the stock would go on to soar 13% the day after posting another monster quarter in early November. Revenue soared 61% in the third quarter, fueled by a 56% spike in items sold through its site and a 70% surge in transactions completed using its proprietary MercadoPago payment platform. As big as MercadoLibre has become -- and we're talking about a marketplace that is now averaging more than $1 billion in monthly gross merchandise volume, topping $3 billion for the first time in its latest quarter -- it's showing no signs of slowing. Revenue has risen 74%, 59%, and 61% in its last three quarters, respectively.

Things won't always be as rosy as they feel right now. It took nearly three months for the stock to topple the all-time highs it set this summer. MercadoLibre slid in October when Brazil's Valor Economico financial newspaper reported that Jeff Bezos was making a bigger push in Latin America. Clearly, the stock has overcome those fears after its blowout quarter, and now we find an analyst who had reservations about his bullishness two months ago gushing about the stock's compelling value at this point.

Calling MercadoLibre "relatively inexpensive" may seem odd at this juncture. Olson's price target would find the stock fetching more than 100 times next year's consensus earnings forecast. However, you can't judge a growth stock merely by its earnings multiple. MercadoLibre's market leadership and stunning growth momentum matter. There was no shortage of valuation hounds calling the stock ridiculously overpriced a year ago, and we've seen it more than double. The worrywarts weren't right then, and they're probably not now. 

Invest Smarter with The Motley Fool

Join Over 1 Million Premium Members Receiving…

  • New Stock Picks Each Month
  • Detailed Analysis of Companies
  • Model Portfolios
  • Live Streaming During Market Hours
  • And Much More
Get Started Now

Stocks Mentioned

Mercadolibre, Inc. Stock Quote
Mercadolibre, Inc.
$636.87 (-3.52%) $-23.26

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

Related Articles

Motley Fool Returns

Motley Fool Stock Advisor

Market-beating stocks from our award-winning analyst team.

Stock Advisor Returns
S&P 500 Returns

Calculated by average return of all stock recommendations since inception of the Stock Advisor service in February of 2002. Returns as of 06/30/2022.

Discounted offers are only available to new members. Stock Advisor list price is $199 per year.

Premium Investing Services

Invest better with The Motley Fool. Get stock recommendations, portfolio guidance, and more from The Motley Fool's premium services.