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Is MercadoLibre Stock a Buy Ahead of Earnings?

By Jon Quast, Danny Vena, and Brian Withers – Updated Aug 2, 2021 at 10:14AM

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These investors say "no." But not for the reason you might think.

Latin America's e-commerce and payments giant MercadoLibre (MELI 0.08%) is expected to report quarterly financial results on Aug. 9. As of this writing, the stock is down roughly 17% from its high. But with the chance of reporting strong financial results, some investors wonder if they should buy shares now before the company reports.

In this video from Motley Fool Live, recorded on July 15, Fool contributors Brian Withers, Jon Quast, and Danny Vena explain why buying MercadoLibre stock before earnings might not be the best investor mentality to have. For these contributors, MercadoLibre is a stock to buy and hold for a long time -- there's no need to try to cleverly time an entry point with a company like this.

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Brian Withers: Jon's question, it looks like it got upvoted here, about MercadoLibre. "Hey, Danny, time to add to MercadoLibre ahead of earnings? What percent is MELI of your portfolio?" For me, MercadoLibre is actually my No. 1 position. I know that Danny would probably tell you the same thing that I would, it's always a good time to buy MercadoLibre. [laughs] We were talking about it earlier. It's under an $80 billion market cap. We were talking about it before the show started. It's just got tremendous opportunity ahead of it. I would check out the end of the Coupang deep dive. We look at Coupang next to Sea Limited, next to MercadoLibre and, and Jumia and of all of those, I really still like MercadoLibre. It is 13% of my portfolio right now.

Jon Quast: I'll jump on there, Brian. I'm embarrassed to say that I don't own any MercadoLibre and I don't really have a good reason why. I've lived in South America for a good 10 years. I've spent a lot of time in Mexico, I've spent time in Brazil, spent a lot of time in Paraguay, Argentina. I've been to all these places. One of my observations from being on the ground is just how early it is in e-commerce and digital payments. Things like that in Latin America, it is unbelievably early. So much is done with cash in person. That is quickly changing with the younger generation.

Withers: Awesome, Danny, time to buy MercadoLibre ahead earnings?

Danny Vena: I wouldn't necessarily say "ahead of earnings is a time to buy." At this point, and based on what the company is doing, I would say virtually any time is a good time [laughs] to buy MercadoLibre. I think I will go for that. 

Withers: That's exactly what I said, Danny. [laughs]

Vena: You know me, I don't go with the buy before earnings or buy after earnings or wait for this particular benchmark. MercadoLibre has been on the cutting edge of e-commerce and of digital payments in Latin America for more than a decade. As Jon mentioned, this is still the very early innings. This is in a region where less than half the people have a bank account or a credit card, and so the ability to just take cash, go to your local convenience store similar to our 7-Eleven and say, "Hey, I want to put money in my account," and bam. They can pay for stuff right there on the spot.

This is gradually changing the dynamic in Latin America, and it also provides barriers to entry for just about anybody else who is trying to impinge on their territory. I think if you buy MercadoLibre now and hold it for a decade and ignore the price swings, and there will be, there will be price swings of 25% to 40%, both up and down. Ignore that, buy the stock, hold it, you will be glad you did.

Jon Quast has no position in any of the stocks mentioned. The Motley Fool owns shares of and recommends Coupang, Inc.,, Jumia Technologies AG-ADR, MercadoLibre, and Sea Limited. The Motley Fool has a disclosure policy.

Stocks Mentioned

MercadoLibre Stock Quote
$863.81 (0.08%) $0.72 Stock Quote
$58.45 (-3.15%) $-1.90
Sea Stock Quote
$58.10 (-2.78%) $-1.66
Jumia Technologies AG - ADR Stock Quote
Jumia Technologies AG - ADR
$3.98 (-7.01%) $0.30
Coupang, Inc. Stock Quote
Coupang, Inc.
$18.12 (0.67%) $0.12

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

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