Please ensure Javascript is enabled for purposes of website accessibility

Why MercadoLibre, Inc. Stock Popped 23% in January

By Steve Symington - Feb 12, 2018 at 6:02PM

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

The Latin American e-commerce giant enjoyed a wave of optimism from Wall Street last month. Here's what investors need to know.

What happened

Shares of MercadoLibre Inc. (MELI -2.00%) climbed 23% in January, according to data from S&P Global Market Intelligence, as multiple analysts offered encouraging notes on the Latin American e-commerce giant.

No less than three Wall Street firms weighed in on MercadoLibre's prospects last month, starting with reinstated coverage and a hold rating from Deutsche Bank on Jan. 4. At the time, analyst Masha Kahn lauded MercadoLibre's history of innovation, customer focus, and proven ability to generate value for shareholders. Furthermore, Kahn noted the company is poised to benefit from "a large addressable market opportunity [...] in both e-commerce and online payments in Latin America."

Man holding a package next to a notebook computer, online shopping

Image source: Getty Images.

So what

But Kahn also cautioned that competition is on the rise, and worried that MercadoLibre's valuation at the time left little room for execution errors. To be sure, MercadoLibre stock doubled in 2017, including a more-than-30% pop in the final two months of the year following its stellar third-quarter report in early November. 

Less than a week later, however, Credit Suisse analyst Stephen Ju continued to spur MercadoLibre higher by reiterating his outperform rating and increasing his per-share price target from $380 to $385 (shares trade at roughly $354 as of this writing). To justify his increased optimism, Ju cited a higher-than-expected unit volume growth forecast in Brazil, particularly as MercadoLibre's investments in free shipping subsidies enable it to take market share from competitors.

Then later in the month, Stifel's Scott Devitt followed by maintaining his buy rating and raising his per-share price target to $415 from $350. Devitt largely echoed Ju's sentiment, speculating that MercadoLibre enjoyed continued strong sales momentum in both Brazil and Mexico through the holidays thanks to its shipping, customer loyalty, and marketing initiatives. 

Now what

Time will tell whether Wall Street's optimism is merited; investors will receive their next update to that end when MercadoLibre announces fourth-quarter 2017 results late next week. But in the meantime, it was no surprise to see the stock continuing to soar last month.

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.
$646.96 (-2.00%) $-13.17

*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.