MercadoLibre (MELI +1.36%) stock still has a long way to go before it revisits the all-time highs it reached in March, but the leading Latin American online marketplace operator is storming back with a vengeance. MercadoLibre stock rose 14% last week, fueled in part by an analyst boosting his price target on the shares.
Stephen Ju at Credit Suisse lifted his price target from $380 to $425. He's naturally sticking to his bullish outperform rating. The timing matters. MercadoLibre reports on its second quarter late next week, and his move to raise the ceiling just days ahead of a critical financial update is good sign. Even if there are some potential headwinds weighing on MercadoLibre with its upcoming report, Ju is clearly upbeat about the company's long-term prospects.
Image source: MercadoLibre.
Southern comfort
MercadoLibre stock has now soared 33% since bottoming out in May, but it still kicks off this trading week 11% below its high. The marketplace operator with strongholds in Argentina and Brazil -- but basically a force through most of Latin America -- finally has momentum on its side. Too bad it burned investors last time out.
The e-commerce giant's shares took a hit in May after it posted Q1 revenue growth that fell short of market expectations. Currency fluctuations and an accounting change in how it records shipping subsidies weighed on the reported results, but investors were left unimpressed even after weeding through the one-time hits.
The good news is that MercadoLibre's fundamentals are holding up better than you'd expect based on the market's reaction to the report. A whopping $3.13 billion of gross merchandise volume was sold through its platform, 34% higher than in Q1 2017. The number of unique buyers in the site had increased by 28% year over year. MercadoPago -- its transaction processing arm -- saw its payment volume soar 60% to $4.18 billion. Yes, MercadoPago is a growing force outside of MercadoLibre's marketplace. And its MercadoEnvios fulfillment subsidiary, as well as its other merchant services, are growing at healthy rates.
Investors who set their benchmarks for MercadoLibre based on Q4 2017, when it reported its heartiest top-line growth in more than a decade, were in for a rude awakening in May, but there will always be lumpiness to the Latin American giant's financial results. Inflation, currency swings, and quick shifts in consumer sentiment guarantee that there's no such thing as a boring quarter for MercadoLibre. Some investors have also been concerned about the margin-gnawing costs of the free shipping and loyalty programs that are necessary to keep shoppers active.
Volatility will naturally continue into next week with the Aug. 2 quarterly report. Back-to-back disappointing quarters would rock the market's confidence, but the stock's recent gains suggest that investors are getting upbeat about MercadoLibre at just the right time.
