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5 Things MercadoLibre Investors Should Be Watching

By Danny Vena - Dec 22, 2020 at 11:00AM

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When it comes to gauging success, opinions vary, but management has the clearest insight into what's driving growth.

Ask 20 investors the most important metric for judging their favorite stock and you'll likely get 20 different answers. Shareholder's individual priorities factor into what they deem important. The keenest insight, however, is likely to come from a company's management team, which knows best of all how its plans are progressing.

On this episode of Fool Live that aired on Nov. 23, Motley Fool co-founder David Gardner and contributor Danny Vena were joined by Federico Sandler, MercadoLibre's ( MELI -6.75% ) head of investor relations, who shared his unique perspective on what investors should be watching.

Danny Vena: Federico, as an investment, how do you think that MercadoLibre's risk profile has changed in 2020 as a result of the pandemic, and what do you think investors should be focused on with the company?

How the risk profile has changed

Federico Sandler: Obviously, excluding the risks that we can't control but haven't had too much of an impact in the growth of the business, political risk, and whatnot, but overall, I think we're fairly comfortable across the region.

But if you look at the risks that we can control, I would say the risk profile has improved. Essentially because we de-risk our weakest flank logistics, and we actually have turned that into a competitive advantage across several regions. At the same time, because of the scale that we've got in, we can continue to invest aggressively with positive bottom line.

Additionally, I think not only we offer world-class products, but like I said, we can acquire those users cheaper on the marketplace, and retain them at a lower-cost because we have the marketplace with improved service levels, and stickiness through logistics, and deeper selection.

Five things investors should watch

What investors should watch out going forward, I would say is A, the percentage of volume being done on managed network, because clearly managed network is cheaper, faster, better net promoter scores, more stickiness.

Also, what we're doing around category expansion, and purchase frequency on the e-commerce piece, which continue to show phenomenal growth even when we look at cohorts, pre-COVID and post-COVID, their return rates, and stickiness have increased substantially.

Then on the fintech piece I think investors should watch out for how active payers are behaving on the wallet, they should be paying more frequently, where right now I think I'd like 12 payments per quarter, Argentina's closer to 20. We would like to continue to accelerate that so that we can actually make this [holds up his smartphone] your wallet, and not the plastic.

And then I would also say a greater mix of revenues coming from the other financial services we will be distributing. Credit including a [MercadoLibre] credit card that we will launch in Brazil, [insurance technology], investment or asset management, payroll services, the merchants to name a few.

And also I think we should be making more inroads, trying to gain the principality of accounts, of many of our users. For example, being able to receive your salary in your mobile wallet, because usually people who receive their salary on a mobile wallet and in a bank account, that tends to be your principal financial relationships, and then brings all sorts of other benefits to cross-sell, and improve stickiness, and also bottom-line.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis – even one of our own – helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.

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