Please ensure Javascript is enabled for purposes of website accessibility
Free Article Join Over 1 Million Premium Members And Get More In-Depth Stock Guidance and Research

Here's Why MercadoLibre Shares Soared 26% in February

By Lou Whiteman - Updated Apr 11, 2019 at 10:04AM

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

Strong fourth-quarter results helped assure investors after a wait-and-see 2018.

What happened

Shares of MercadoLibre ( MELI -7.09% ) jumped 26% in February after the Argentine e-commerce giant delivered fourth-quarter earnings that exceeded expectations and helped to calm some of the worries that had surrounded the company through much of 2018.

So what

MercadoLibre has been a great longtime performer, with its shares up more than 353% in the last five years. But the stock was down 6.93% in 2018 due to unexpected Brazilian postal rate hikes, a trucker strike, and an accounting rule change that made results appear weaker than under the old standard. The company missed analyst expectations last summer due to that confluence of factors, and investors seemingly took a wait-and-see approach in the months that followed.

Check out the latest earnings call transcript for MercadoLibre.

A hand-drawn stock chart showing growth.

Image source: Getty Images.

The fourth-quarter results provided investors with reason to cheer. MercadoLibre reported net revenue of $428 million, up 20% year over year, and a strong 62% in local currencies. The company lost $0.05 per share, better than the $0.13 expected by analysts, and significantly improved from the $1.53 loss per share in the year-ago quarter.

Adjusting for foreign exchange losses resulting from the weakness of the Argentine peso versus the U.S. dollar, MercadoLibre would have been profitable for the quarter.

Now what

While the company's core marketplace revenue was up, the real standout was its payment growth. Payment transactions increased by 72% year over year to 126 million, resulting in total payment volume of $5.3 billion. Management is feeling confident about the payments business. CEO Pedro Arnt, on a call that followed the results, said that the company's payment arm, MercadoPago, is "a powerful disruptive provider of inclusive financial technology solutions."

MercadoLibre is often referred to as the of Latin America, and like Amazon, company management has been focused on growth at the expense of profitability. But if fourth-quarter results are any indications, those investments look to be paying off, and MercadoLibre seems well on its way to being not just a dominant e-commerce player but also a massive payments provider in the region, with a lot of potential to grow.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis – even one of our own – helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.

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.
$1,104.20 (-7.09%) $-84.21

*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 service.

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 12/02/2021.

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

Our Most Popular Articles

Premium Investing Services

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