After delivering blowout results in each of the two previous quarters, MercadoLibre (MELI 3.09%) expectations were high going into the company's third-quarter financial report. The e-commerce and fintech powerhouse once again delivered triple-digit growth, soaring past expectations.
In this episode of Fool Live that aired on Nov. 4, "The Wrap" host Jason Hall and Fool.com contributor Danny Vena discuss the results and why investors shouldn't underestimate MercadoLibre's potential.
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Danny Vena: Essentially what we're talking about here is a blowout of epic proportions. Here we go, and I'm back to the screen sharing again. Financial highlights. $1.12 billion, expectations were $972 million. I'm going to scroll down here just to jump down so we can get to the income here. Net income was $53 million versus a loss of $67 million in the prior-year quarter.
Now, it's important to remember that the end of last year was one where MercadoLibre was spending a lot of money on an advertising and marketing campaign that was a result of its partnership with PayPal (PYPL 2.90%). This is not representative. They did spend a lot of money.
But to get down here, earnings per share of $0.28, the market was expecting $0.17.
Basically every metric that you can think of, MercadoLibre not only beat, but I mean just obliterated expectations. I'm a happy MercadoLibre shareholder for full disclosure, that is my third-largest position. I don't know what the stock is going to do in the short-term, particularly with the uncertainty that's out there and the fact that it was already up 6% today. But I will say that for people that follow the company, this is far and away, I would say the best quarter that they have ever produced as a public company.
Jason Hall: Yes. Thanks, Danny. It's more context on that one to kind of similar to when we talked about Wayfair (W 2.08%) with Asit. This is a company that's still spending a lot of money to build out its business and that's raising some of these expenses. Some of those expenses are non-cash because they are related to things like depreciation. On a GAAP basis, it's a company that's still losing money after taxes and that kind of stuff on a net income basis. But this is a company that's kicking off a substantial amount of operating cash. You start following the cash and you follow the trajectory on that and it's a good way especially for anybody that's old school and looks at things like price-to-earnings ratio and that sort of thing to contextualize what's going on with this business. Another thing, this is the first time they've ever done a billion dollars of revenue in the quarter, right?
Danny Vena: Absolutely.
Jason Hall: Just think about that. Think about it's about $67, $68 billion market cap. Amazon's worth well over a trillion dollars. It's still, this is half the size of Shopify (SHOP 1.11%). There's still an enormous path for continued growth. People look at the stock and see it's up thousands of percent over the past decade. It's really important to emphasize that this is still a young company that still has an enormous prospects to grow much much larger. Latin America is a huge growth market. There's a lot of countries there that are getting wealthier and more populated. The next decade, the next 20 years is going to be enormous. Having their first move advantage there is super powerful. Danny, thanks for that.
