E-commerce veteran MercadoLibre (MELI 2.59%) is nearly always a good buy. It just happens to be an unusually fantastic investment at this very moment, making it my top stock to buy right now.
Let me explain why.
The basic investment thesis for MercadoLibre
What started as the eBay of Latin America has diversified and grown into a leader in several important fields. MercadoPago is an online payment system supported by physical kiosks throughout key markets. The company circumvented dodgy South American shipping systems by creating its own freight service, MercadoEnvios.
MercadoLibre also offers a turnkey solution for setting up third-party storefronts using its core e-commerce platform, and there's even a company-owned banking system that offers credit lines to both buyers and sellers.
All of these fringe services tie right back into MercadoLibre's online marketplace, each enhancing the shopping experience or helping the company deal with the difficulties that spring from operating in countries with less-than-stellar infrastructure.
The business model is generating massive top-line growth. Revenue has grown at an average clip of 25% per year over the last five years.
The company is optimizing its operations to create a dominant market share while the Latin American e-commerce sector grows into its britches, leaving earnings and cash flows nearly at break-even levels. Spare cash is immediately invested into further acceleration of the booming revenue metric.
I don't need to remind you that MercadoLibre's shareholders have enjoyed a 1,030% return in the last decade, right? We're talking about a proven performer and wealth creator, whose long-term growth story is still in the early stages. The runway ahead may be bumpy, but it's also very long and sure to start smoothing out as we go along.
Business is booming, as measured by that crucial revenue line. MercadoLibre's third-quarter sales, reported near the end of October, rose 70% year over year to $603 million. All three of the company's largest markets posted strong growth, led by 146% higher sales in Mexico and a 77% increase in Brazil.
But the analyst consensus had called for sales near $648 million, and the market reaction was swift when the company failed to deliver on the expected year-over-year revenue boost of 82%. Share prices fell 12% over the next three days, and they haven't recovered yet. And that's at the tail end of a slower drop that started in August.
So that's where we stand. MercadoLibre remains a leader in Latin American e-commerce, poised to benefit as the region moves online amid improving economies and more-reliable payment systems -- led by the in-house MercadoPago solution. Buying this stock is a play on Latin America as a whole, and that's a very promising idea in the long term.
You can pick up shares today at a substantial 38% discount from August's all-time highs. Hold on for several years and thank me later.