Over the past five years, MercadoLibre (NASDAQ:MELI) has grown from a $5 billion company to one with a market cap of more than $83 billion. The increase in size has seen a corresponding increase in interest from investors around the world.
On this episode of Fool Live that aired on Nov. 23, Motley Fool co-founder David Gardner and Fool.com contributor Danny Vena were joined by Federico Sandler, MercadoLibre's head of investor relations, who talked about what investors most want to know about the company and its vision for the future.
David Gardner: Speaking of communicating to about your coming to the financial world, I'm just curious if you could tell us a little bit about what it looks like from your view point. Danny and I see you a couple of times a year, but you have many conversations, two questions for you.
First of all, how much infrastructure is there for financial analysis within Latin America, i.e. do you take more calls from Wall Street, or do you take more calls from either Latin America or outside? I'm just wondering how Wall Street driven you are, that's question 1.
Question 2, what are the most frequent questions that you are asked by analysts, we just get to have an hour with you here, but I know you spend a lot of time speaking to many others. What are the questions they're asking these days?
Federico Sandler: Perfect. Starting with the first question, when I started about five years ago, it was mostly Wall Street-driven, but also we had some inbound from the UK and Scotland, one of our largest shareholders, is actually based in Edinburgh, and then some of it from Continental Europe.
I think what's happened as we've grown in market cap, and we've grown on payments, and marketplace, and logistics, I think we've started to get a lot of interest from Brazilian investors as well. I think the deepest capital markets in Latin America is Brazil. Incremental engagement also from Brazilian investors. We've also started to penetrate with the team the Chilean, and Yen region, there's a lot of pension funds there, so we started to penetrate that base as well.
Then there's also been increasing interest, particularly from Asia, Hong Kong, Singapore, there's a couple of sovereign funds there. It's grown from just US, and Europe, to more Brazil, Latin America, US, Europe, and Asia. Although our shareholder base is still heavily geared toward US, and Europe, I would say, although one of our shareholders is Brazilian, I must mention that.
Then in terms of questions, I think there a few of them. One of them is obviously competition -- that is a very relevant one.
Also, how to think about margins, because I think if you've looked up the margin trajectory of our business, it's being compressing probably since 2017 onwards as a consequence of the very intelligent investments that we've done in hindsight, in logistics, and how to think about the margin structure given the pandemic. Because basically what the pandemic has generated is lower cost of acquisition. We need to spend less on acquiring consumers because otherwise you will be cannibalizing the existing traffic. And that's driven more bottom line.
But I think as I mentioned with our scale, I think we appreciate that we're valued on a revenue multiple, to continue to invest aggressively, but with a greater discipline on the bottom line.
Competition, profitability, then how to think about what we're doing around category expansion.
For those who have been following the story, we've started to move very quickly into not only in certain verticals, buying inventory ourselves to resell, to generate, not competition with merchants, but actually to fill supply gaps, or guarantee lowest prices. We started to do what we call first-party in consumer electronics, in [consumer packaged goods], which is very relevant during the pandemic, and also in fashion. Then how to think about that, and how that impacts margins, back to the profitability question. Then I think there's also a lot of questions around how to think, and it's I think one of Danny's questions, how to think about what are the profit pools of the fintech business going forward beyond payments?