Please ensure Javascript is enabled for purposes of website accessibility

Why MercadoLibre Stock Was Gaining Today

By Jeremy Bowman – Aug 10, 2021 at 2:41PM

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

A disappointing report from e-commerce peer Jumia seemed to highlight MercadoLibre's strengths.

What happened

Shares of MercadoLibre (MELI 1.38%) were moving higher today even as there was no company-specific news on the Latin American e-commerce company.

Instead, a disappointing report from fellow international e-commerce stock Jumia Technologies (JMIA -2.94%) seemed to highlight MercadoLibre's strengths as the two often draw comparisons with each other. During a quarter when e-commerce stocks largely faced difficult comparisons with the year-ago quarter, MercadoLibre stood out as one of the rare winners in the sector after surging on its earnings report a week ago, passing its second-quarter update with flying colors. Jumia's report seemed to highlight those strengths further.

As of 1:01 p.m. EDT, MercadoLibre stock was up 5.7%, while Jumia had given up 5.5%.

Someone shopping on the MercadoLibre app while stretched out on a couch.

Image source: MercadoLibre.

So what

MercadoLibre stock had jumped 14% last Thursday after the company delivered strong Q2 results, which included revenue doubling on a currency-neutral basis to $1.7 billion, easily beating estimates at $1.46 billion. On the bottom line, earnings per share climbed from $1.11 to $1.37, which smashed estimates at $0.11.

MercadoLibre's payments business continued to shine with total payments volume jumping 72% to $17.5 billion and gross merchandise volume (GMV) up 46% to $7 billion.

Some investors see Jumia, which functions as an e-commerce and digital payments business in Africa, as similar to MercadoLibre since it operates with a similar business model and is focused outside the U.S. However, Jumia is much smaller. 

In its Q2 earnings report, Jumia posted an 11% decline in GMV to $223.5 million, in part a reflection of its transition to third-party sales and lower-priced, more-frequently purchased items. Overall, revenue was up 4.6% to $40.2 million, which missed estimates at $42.3 million. On the bottom line, Jumia's adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) loss widened 15% to $41.6 million, a worrying sign as the company had been sacrificing top-line growth in order to trim its losses.

Now what

Jumia wasn't the only e-commerce company to miss the mark this quarter. High-profile, e-commerce stocks like Amazon, Etsy, Alibaba all fell on their earnings reports, posting underwhelming numbers.

That shows how strong MercadoLibre's business is as it was able to double revenue on a currency-neutral basis two years in a row. While the stock is pricey, such growth shows its potential and warrants a high valuation. Investors are responding accordingly.

John Mackey, CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool's board of directors. Jeremy Bowman owns shares of Alibaba Group Holding Ltd., Amazon, Etsy, and MercadoLibre. The Motley Fool owns shares of and recommends Alibaba Group Holding Ltd., Amazon, Etsy, Jumia Technologies AG-ADR, and MercadoLibre. The Motley Fool recommends the following options: long January 2022 $1,920 calls on Amazon and short January 2022 $1,940 calls on Amazon. The Motley Fool has a disclosure policy.

Stocks Mentioned

MercadoLibre Stock Quote
$896.48 (1.38%) $12.24 Stock Quote
$89.09 (-1.40%) $-1.26
Alibaba Group Stock Quote
Alibaba Group
$91.34 (-3.00%) $-2.83
Etsy Stock Quote
$126.78 (-5.74%) $-7.72
Jumia Technologies AG - ADR Stock Quote
Jumia Technologies AG - ADR
$3.96 (-2.94%) $0.12

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

Related Articles

Premium Investing Services

Invest better with The Motley Fool. Get stock recommendations, portfolio guidance, and more from The Motley Fool's premium services.