The stock market was hovering near flat for much of the day on Tuesday, but Latin American e-commerce and fintech company MercadoLibre (MELI -0.81%) was a big underperformer. Shares were down by more than 4% at 3:15 p.m. EST and had been down by more than 5% earlier in the session.
The short explanation for today's move is that MercadoLibre reported its fourth-quarter earnings on Monday after the market's close, and investors don't seem too thrilled with the results.
At first glance, the numbers look pretty strong. In the fourth quarter, gross merchandise volume (GMV) on MercadoLibre's marketplace increased by a staggering 110% year over year. On the fintech side of the business, the Mercado Pago payments platform saw payment volume soar by 134% from the same quarter in 2019, and the most important component, off-platform volume, grew by 150%. In all, MercadoLibre's revenue climbed 149% year over year.
While it might seem odd that the stock would fall after numbers like that, there are a few potential reasons why we're seeing MercadoLibre sell off a bit. For one thing, while growth was impressive, some of the key numbers decelerated, such as off-platform payment volume, which grew by an even better 197% year over year in the third quarter.
In addition, while revenue surpassed expectations, earnings did not. MercadoLibre posted a surprise earnings loss, with EBIT margins falling from 7% in the third quarter to negative 2% in the fourth.
MercadoLibre's stock price is up by 165% over the past year, even after today's decline. While the earnings report was definitely strong, it wasn't exactly breathtaking compared to the company's past few quarters. While the long-term growth story remains intact, it's not completely surprising to see the stock cool off a bit today.