Please ensure Javascript is enabled for purposes of website accessibility

Here's Why MercadoLibre Stock Is Soaring Today

By Matthew Frankel, CFP® - Nov 5, 2020 at 11:06AM

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

Investors cheered the Latin America e-commerce company's third-quarter results.

What happened

The stock market is continuing its post-election rally today, with all three major averages in the green, and the tech-heavy Nasdaq up by 2.5% at 10 a.m. EST. However, MercadoLibre (MELI -1.70%) is doing even better, with shares rising more than 7% after the Latin America e-commerce company reported its third-quarter earnings.

So what

To say that MercadoLibre's third-quarter results were good would be a major understatement. On the top and bottom lines, the company handily exceeded revenue and earnings projections, but that doesn't tell the whole story.

Rising orange and blue stock chart

Image source: Getty Images.

On the marketplace side of the business, MercadoLibre's gross merchandise volume (GMV) increased by a staggering 117% year over year, and over 205 million items were sold on the platform, more than doubling from the prior-year quarter.

On the fintech side of MercadoLibre's business (Mercado Pago), the results were even stronger. Total payment volume reached $14.5 billion, up 161% versus a year ago, and payment volume from off-platform sources nearly tripled.

As a result, MercadoLibre generated $1.12 billion in revenue, representing 148% year-over-year growth. Not only is this impressive all by itself, but it's important to point out that the company's revenue growth is accelerating as time goes on.

Now what

For the time being, MercadoLibre isn't a terribly profitable company, but with growth like this, that's OK. It's not even much of a concern that gross margin declined significantly year over year, as it was primarily a result of the company opening new centers, and this will naturally improve as it expands and matures. At some point, MercadoLibre investors will want to see a clear path to sustained profitability, but for right now the company's growth story continues to take center stage.

Matthew Frankel, CFP owns shares of MercadoLibre. The Motley Fool owns shares of and recommends MercadoLibre. The Motley Fool has a disclosure policy.

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.
MELI
$980.95 (-1.70%) $-16.95

*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 analyst team.

Stock Advisor Returns
394%
 
S&P 500 Returns
127%

Calculated by average return of all stock recommendations since inception of the Stock Advisor service in February of 2002. Returns as of 08/18/2022.

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

Premium Investing Services

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