MercadoLibre, Inc. (NASDAQ:MELI)

CAPS Rating: 4 out of 5

An online trading company which focused on enabling e-commerce and its related services.

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Member Avatar DINEROne (56.91) Submitted: 8/20/2014 10:28:43 PM : Outperform Start Price: $112.80 MELI Score: +1.09

This is the Amazon/Ebay of Latin America. It may be volatile, but I think that over the long term this company is going to outperform in a big way.

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Member Avatar TMFJMo (70.47) Submitted: 7/30/2014 10:38:31 AM : Outperform Start Price: $93.12 MELI Score: +21.38

The middle class is coming! First-mover advantage is proving to be a big deal for the ecommerce king of Latin America and that eBay still holds 18.5% of the shares is very telling indeed. Many ways to make their money and the model is working. Gotta be long this stock.

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Member Avatar TMFbuild (36.75) Submitted: 7/24/2014 10:03:59 AM : Outperform Start Price: $90.54 MELI Score: +25.90

MercadoLibre works superbly on a free-market model growing in six Latin American countries. Intelligently, the company entered into a strategic alliance with eBay to keep one of the biggest players at bay. MercadoLibre has done very well in terms of both revenue and earnings in past seven years, including the recession years. The revenue stream is also diversified. The Internet penetration in Latin American countries is still less than 50% on average. Rising disposable income and a growing middle class provide huge scope of growth. The ROIC and net profit margin for the past five years have been 33% and 25%, respectively. So it can afford aggressive marketing if, in the future, new players enter the market. And there is a bonus: It pays small dividend! In spite of such an outstanding performance, the company is trading relatively cheap.

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Member Avatar TMFBwithbike (71.78) Submitted: 7/4/2014 9:31:37 PM : Outperform Start Price: $96.04 MELI Score: +18.23

A bet on the economic growth of Central and South America.

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Member Avatar TMFCheesehead (88.68) Submitted: 4/17/2014 11:28:54 PM : Outperform Start Price: $85.84 MELI Score: +26.26

Worth re-upping on this dip. Currency fluctuations come and go, the business is here to stay.

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Member Avatar Qsinger47 (< 20) Submitted: 4/16/2014 5:09:48 PM : Outperform Start Price: $84.74 MELI Score: +27.51

Growth opportunities in South America. Once their economies recover a bit, this stock will start to move up.

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Member Avatar L8starter (71.31) Submitted: 3/17/2014 7:11:18 AM : Outperform Start Price: $97.38 MELI Score: +9.89

Latin America's e-bay. Top dog in industry. Excellent LTD/equity = 0.03, steady revenue growth, steady dividend increase. Victim of temporary capital flight from emerging markets. ~30% off high because of emerging market fears. Excellent chance to take advantage of emerging market fears. Invest while others are fearful.

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Member Avatar surabayajhonny (56.47) Submitted: 3/15/2014 8:38:21 PM : Outperform Start Price: $97.38 MELI Score: +9.89

The worst is priced into the stock.

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Member Avatar GreenChilePepper (42.48) Submitted: 2/25/2014 11:33:13 PM : Outperform Start Price: $89.68 MELI Score: +19.75

Exchange rates have given us a discount on this growing company that continues to thrive.

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Member Avatar kmpusa (< 20) Submitted: 2/8/2014 8:54:49 AM : Outperform Start Price: $95.08 MELI Score: +9.21

MELI is sitting in a space without much competition and will continue to grow. The stock is primarily depressed on worries of currency fluctuation.

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Member Avatar ayaghsizian (97.15) Submitted: 1/25/2014 3:55:38 PM : Outperform Start Price: $91.24 MELI Score: +13.89

Why didn't I pick this company years ago when it was $15? This has tremendous potential over the next 20 years and I believe eBay still owns 19.5% of the company which should help future growth. Now I have to buy less shares at $95 per share. With proper guidance and management which I hope they do have, there is every reason to believe they will be huge in the future. Same thesis for PSMT by the way.

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Member Avatar Richiedebo (49.33) Submitted: 1/14/2014 11:56:16 PM : Outperform Start Price: $96.22 MELI Score: +10.47

Stock is another eBay. Underperforming big time Not bad company.

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Member Avatar Seattleldg (58.41) Submitted: 1/8/2014 6:56:04 PM : Outperform Start Price: $100.19 MELI Score: +5.71

A great business in a rapidly growing region of the world.

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Member Avatar bostonbear (86.77) Submitted: 12/31/2013 8:42:22 AM : Outperform Start Price: $106.64 MELI Score: -1.25

I missed eBay... not going to miss this one.

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Member Avatar TMFBuck (54.03) Submitted: 12/12/2013 5:37:12 PM : Outperform Start Price: $104.77 MELI Score: -2.72

We've seen this play out before with eBay. Two great businesses here with low debt, very little capital expenditures and a well known brand.

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Member Avatar dstwhit (88.03) Submitted: 11/14/2013 8:05:58 AM : Outperform Start Price: $110.24 MELI Score: -8.14

near monopoly position; growth thru increased internet access in L.A.; temp drop due to currency valuation

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Member Avatar TMFInnovator (63.30) Submitted: 11/13/2013 10:13:59 AM : Outperform Start Price: $110.74 MELI Score: -9.80

MercadoLibre keeps getting referred to as "the Ebay of Latin America".

Just in case "they" are right, I ran a comparison of MELI with EBAY. I assumed MELI would mimic EBAY in as many ways as possible. Then I compared its valuation to its current market cap.

Long story short, MELI's valuation would be worth $23 billion once mature --- or roughly $518 per share. At today's price of $110, that's a boatload of upside.

Whether or not the prognostication is accurate, the message was clear that this stock should continue to be en fuego. Outperform.
____________________________________________________

http://boards.fool.com/1069/breakout-30862960.aspx?sort=whole#30863332

(9/9/2013 on the RB boards)

This was kind of an interesting article that I reference just to keep things in perspective:

http://pulsosocial.com/en/2013/08/01/e-commerce-in-latin-ame...

- e-commerce in Latin America (as a whole) will be approximately $69 billion this year
- e-commerce in the US will be approximately $200 billion this year

EBAY has a similar business model as MELI and sports a market cap today of $68 billion. The total e-commerce market in Latin America is roughly 1/3 that of the US.

IF MELI were to find a way to become "the EBAY of Latin America" (everyone's favorite saying these days) and mimic EBAY's operations in every way possible (% share of the total e-commerce market, % margins, etc), they could expect their fundamentals to be roughly 1/3 of EBAY's as well. Or, said another way, their top and bottom lines would be 1/3 as large.

And if the market applied the same valuation to MELI's fundamentals as they do to EBAY's, MELI could have a market cap ~ $23 billion (1/3 * $68b).

Based on today's market cap of $5.7b, that would imply a 300% upside -- or a potential price of $518 per MELI share.

I know that this analysis is simplistic and inherently flawed. And I'm happy to hear any thoughts/opinions/outspoken verbal attacks about my assumptions (one of the largest being that MELI could sell to all of Latin America). But my bottom line is that if MercadoLibre can continue to grow, the Latin American e-commerce market can support plenty of upside for them. $128/share could seem like nothing, a few years down the road.

-Simon
Long MELI

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Member Avatar drdm (46.99) Submitted: 11/6/2013 10:31:29 AM : Outperform Start Price: $118.64 MELI Score: -16.50

Last quarter was a good one. Currency fluctuations make results look funky. Will continue to perform well in the future particularly with recovering world economy

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Member Avatar klarcbarr (34.50) Submitted: 10/17/2013 5:32:10 AM : Outperform Start Price: $134.34 MELI Score: -31.55

As Latin America continues to rise in wealth and computer acess, Mercado Libre reaps the rewards of wide-moat sector leadership in both South and Central America..

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Member Avatar convexvalue (91.24) Submitted: 9/3/2013 3:11:06 PM : Underperform Start Price: $120.82 MELI Score: +26.94

Great company, great business model, highly desirable market position in an industry that lends itself to demand side economies of scale (network effects). MELI has a strong economic moat, no qualms about that. However, the market price is expecting too much.

- This company is trading at 51x TTM earnings. I estimate 2013’s FCFE to fall somewhere near $93M, meaning a multiple of 57x.

- Make the following assumptions: MELI manages to grow FCF at a rate of 15% a year for the next decade, and then apply a perpetuity growth rate of 6% (both pretty heroic assumptions). Apply a discount rate of 12%. Our fair value estimate would be close to $80 a share, well below its $120 current market price.

- Venezuela represents 15% of the revenues, and 20% of the operating profits. No company has been able to expatriate any money from Venezuela since 2011, and the outlook is quite pessimistic for the next 6 years (until Maduro’s rule –hopefully- ends). Even then, in the quite optimistic scenario that a pro-market president takes office, he is bound to push for a drastic devaluation of the bolivar (Venezuela’s currency) which will definitely hurt MELI’s performance in this country, as well as it’s accumulated assets. The illegal exchange rate in Venezuela is USD 1 = 32 VEF (which compares to the official yet fictitious rate of USD 1 = 6.3 VEF)

- Argentina represents 24% of the revenues, and 23% of the operating profit. Just like in Venezuela, Argentina applies currency controls, meaning the effective impossibility to expatriate any profits. Likewise, the argentinian peso is long due to depreciate, which the government resists. It is widely expected that Argentinas’ next government will execute a painful devaluation of the peso, which will hurt MELI’s performance (however, this might be partially compensated with a proportional decrease in SG&A and R&D expenses, since MELI’s headquarter is located in Argentina).

- The internet penetration rate is close to 50%. Europe’s most developed countries boast rates close to 80%. Even if this was achieved in 5 years, it would imply a CAGR of 10%. And afterwards there’s little growth in this. After this theoretical catch up, all growth must come from GDP per capita growth, increase in market share (which MELI already dominates), increase in ecommerce as a percentage of GDP (which could at most double, if it is to catch up with developed nations)

- Argentina & Venezuela’s currencies need to crack. Brazil’s growth is moderating. Mexico is fine, but represents less than 5% of the revenues.

- To sum up: MELI is in an enviable position in Latin America’s e-commerce, however the market’s expectations are “too damn high”. I would rate it a "Hold" at best.

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