Technology

MercadoLibre (MELI) Up 8.6% Since Last Earnings Report: Can It Continue?

A month has gone by since the last earnings report for MercadoLibre (MELI). Shares have added about 8.6% in that time frame, outperforming the S&P 500.

Will the recent positive trend continue leading up to its next earnings release, or is MercadoLibre due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important catalysts.

MercadoLibre Reports Loss in Q4, Revenues Up Y/Y

MercadoLibre reported fourth-quarter 2018 loss of 5 cents per share, narrower than the Zacks Consensus Estimate of 18 cents. The figure also compares favorably with loss of $1.53 in the year-ago period and loss of 23 cents per share in the third quarter.

Total revenues increased 19.5% year over year (61.8% on an FX neutral basis) to $428 million, surpassing the Zacks Consensus estimate of $404.4 million.

The company’s online-to-offline payment offerings continued to gain traction in the fourth quarter, which contributed considerably to revenue generation.

Key Metrics

GMV of $3.2 billion decreased 10.6% year over year but increased 17.6% on an FX neutral basis. This can be primarily attributed to a decline in the company’s free shipping offers.

Total confirmed registered users at the end of the reported quarter were 267.4 million, improving 26.2% year over year. Further, new confirmed registered users during the period were 18.8 million, increasing 75.7% on a year-over-year basis.

Total payment volume (TPV) was up 22.1% on a year-over-year basis to $5.3 billion. This was due to strong performance of MercadoPago.

Total volume of payments on marketplace was $2.95 billion, up 0.1% year over year. Further, total payment transactions increased 71.6% year over year to 125.6 million.

Unique buyers improved 7.3% year over year to 19 million. However, unique sellers were 4.1 million, down 10.9% from the prior-year quarter.

Operating Details

Gross margin was 47.8%, contracting 900 basis points year over year. This can be attributed to increasing expenses related to transition of infrastructure on public clouds, free shipping subsidies, warehousing and discounts on mPOS devices.

Adjusted operating expenses totaled $205.6 million (48% of total revenues), reflecting a decrease of 23.3% year over year.

The company reported operating loss of $0.8 million compared with the year-ago figure of $64.6 million.

Balance Sheet & Cash Flow

At the end of the fourth quarter, cash and cash equivalents were $440.3 million, and short-term investments amounted to $461.5 million.

In the fourth quarter, cash generated from operations was $34.8 million compared with $96.6 million in the prior-year period.

How Have Estimates Been Moving Since Then?

It turns out, fresh estimates have trended upward during the past month. The consensus estimate has shifted 95% due to these changes.

VGM Scores

At this time, MercadoLibre has a nice Growth Score of B, however its Momentum Score is doing a bit better with an A. However, the stock was allocated a grade of F on the value side, putting it in the fifth quintile for this investment strategy.

Overall, the stock has an aggregate VGM Score of C. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

Estimates have been trending upward for the stock, and the magnitude of these revisions looks promising. Notably, MercadoLibre has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.


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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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