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Why MercadoLibre Stock Gained 16% Last Month

By Jeremy Bowman – Jul 3, 2020 at 2:59PM

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The Latin American e-commerce company continued to rally on tailwinds from the pandemic.

What happened

Shares of MercadoLibre (MELI -1.97%) were climbing last month as the Latin American e-commerce operator continued to benefit from pandemic-related tailwinds. Data showed that e-commerce sales surged in the region, and the company received some positive analyst chatter. According to data from S&P Global Market Intelligence, the stock rose 16% in June.

As you can see from the chart below, most of the stock's gains came during the middle of the month.

MELI Chart

MELI data by YCharts.

So what

MercadoLibre kicked off the month on a strong note as BTIG raised its price target on the stock from $775 to $980 on June 1. Analyst Marvin Fong said that e-commerce adoption in Brazil, MercadoLibre's biggest market, had accelerated by four to five years because e-commerce's share of overall retail sales had climbed from 6% at the beginning of the year to 11% to 12% in April.

The MercadoLibre logo

Image source: MercadoLibre.

Later in the month, Barron's called MercadoLibre one of its top stocks in emerging markets, as e-commerce is getting a tailwind from COVID-19. Barclays said the company was well-positioned post-COVID and can sustain volume growth after the crisis.

On June 23, Reuters reported that e-commerce sales in Brazil had grown by 57% to $20.5 billion through the first five months of the year, showing a boom from the pandemic. MercadoLibre also said it would open its third fulfillment center in the country in July, adding a facility in the northeastern part of the country to expedite service after a spike in demand in recent months.

Now what

MercadoLibre is the leading e-commerce marketplace in Latin America and also has a fast-growing digital-payments network, MercadoPago. Both businesses should continue to benefit from the crisis as more shopping and commerce moves online.

The stock is expensive by conventional metrics, but the company's been a consistent winner as it continues to widen its economic moat. The pandemic should only boost its competitive advantages.

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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