Markets

Why Despegar.com and MercadoLibre Stock Fell Monday

What happened

Shares of Argentina-based online travel company Despegar.com (NYSE: DESP) took a hit on Monday, falling about 12.3% as of 12:10 p.m. EDT. The stock's decline comes amid a pullback in many companies' stocks that are based in Argentina, including fast-growing e-commerce giant MercadoLibre (NASDAQ: MELI) and others. MercadoLibre stock was down about 9% Monday morning.

Bearishness toward companies in Argentina on Monday follows news that pro-business Argentina President Mauricio Macri lost a primary election over the weekend. 

A chalkboard sketch of a chart with a downward-sloping arrow.

Image source: Getty Images.

So what

The current Argentina President received 32.1% support in a nationwide primary, compared to 47.7% support for opponent Alberto Fernandez, with most of the remaining votes going to other candidates, reported The Wall Street Journal on Monday. Nearly 100% of the ballots were counted at the time of this measurement, according to the Argentina government.

Highlighting the uncertainty this led to for the country's economy, the peso weakened about 25% relative to the dollar on Monday morning.

Now what

Despegar has been growing nicely recently, with second-quarter revenue rising 5% year over year in on a currency-neutral basis. But revenue was down 11% as reported. MercadoLibre's top-line growth was similarly negatively impacted by currency volatility. Revenue rose 102% year over year in its second quarter on a currency-neutral basis but was up 63% as reported.

More currency volatility from this election could make business even more difficult for these companies.

The country's official presidential election is scheduled for October.

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Daniel Sparks has no position in any of the stocks mentioned. The Motley Fool owns shares of and recommends MercadoLibre. The Motley Fool has a disclosure policy.

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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