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Why MercadoLibre Stock Was Soaring Today

By Jeremy Bowman – May 6, 2020 at 11:37AM

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Shares of the Latin American e-commerce company jumped on a strong earnings report.

What happened

Shares of MercadoLibre (MELI -4.11%) were surging to all-time highs today as the Latin American e-commerce company reported a strong first-quarter earnings report and said that it had held up well in the face of the coronavirus pandemic.

At 10:13 a.m. EDT, the stock was up 19%.

The MercadoLibre logo against the white background

Image source: MercadoLibre.

So what

Total revenue in the quarter jumped 70.5% to $652.1 million, which beat estimates at $633.7 million. On a reported basis, revenue increased 37.6%. Once again, growth in both the marketplace business and payments was strong: Gross merchandise volume was up 34.2% to $3.4 billion, and total payments volume surged 82.2% to $8.1 billion. 

On the bottom line, the company posted an operating loss of $29.7 million as marketing expenses surged, compared to a $10.1 million operating profit in the prior-year quarter. On a per-share basis, it finished with a loss of $0.44, down from a profit of $0.13 a year ago, but that was better than expectations at a $0.48-per-share loss.

CFO Pedro Arnt commented on COVID-19's impact, saying, "Although less affected than others, our business did register this impact, primarily during the first weeks of the imposed lockdowns, with a rebound throughout April," and added, "We feel MercadoLibre has the opportunity to emerge from this situation stronger and with an even greater sense of purpose."

Now what

Management did not give formal guidance, but provided some details of the business's rebound in April. Key performance indicators in its marketplace business bottomed out the week of March 18-24, with currency-neutral GMV declining by 1.4%. However, growth accelerated in April, and GMV was up 72.6% on a currency-neutral basis, ahead of pre-COVID levels; e-commerce businesses in the U.S saw a similar uptick as consumers under stay-at-home orders embraced online retail.

Payment volume was also strong in April, showing that MercadoLibre should be able to continue its rapid growth as e-commerce gains a larger percentage of overall retail market share during the crisis. As a sign of its confidence, the company doesn't plan to significantly adjust any of its strategic or investment initiatives, which include a $700 million investment in Brazil.

MercadoLibre stock has been a big winner over the years, and its competitive advantages only seem to be getting stronger with the impact of coronavirus.

Jeremy Bowman has no position in any of the stocks mentioned. The Motley Fool owns shares of and recommends MercadoLibre. The Motley Fool has a disclosure policy.

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