MercadoLibre, Inc. (NASDAQ:MELI)

bbqbot (30.84) Submitted: 12/14/2007 7:51:33 AM : Start Price: $59.17 MELI Score: +32.73

Just following the front-page advise on this one.

GatorMonty (< 20) Submitted: 12/13/2007 11:22:42 PM : Start Price: $59.17 MELI Score: +32.73

Read about this company online, seemed really promissing, then Cramer raved about it...I'm in.

hawk1943 (< 20) Submitted: 12/13/2007 7:40:31 PM : Start Price: $59.17 MELI Score: +32.73

The ebay of the emerging market.

bloomingcactus (30.73) Submitted: 12/11/2007 9:30:18 AM : Start Price: $49.65 MELI Score: +59.62

Ebay for Latin America. It should work

rmcronin (33.88) Submitted: 12/2/2007 3:34:34 PM : Start Price: $43.87 MELI Score: +76.96

An ebay for all latin america. Huge growth potnetial as more Brazilians go online. I won't be surprised to see them bought in the next two years.

evillate (< 20) Submitted: 11/23/2007 11:06:45 PM : Start Price: $42.35 MELI Score: +80.64

In spanish this means free market. An ebay for everyone in latin america sounds good. Believe it or not they do a lot of business there.

ecnash (31.71) Submitted: 11/23/2007 4:37:52 PM : Start Price: $42.35 MELI Score: +80.64

Thia is a company that is a subsidiary of eBay. It has shown postive growth over the past 52 weeks.

AJL203PSU (65.52) Submitted: 11/7/2007 2:30:32 PM : Start Price: $39.28 MELI Score: +97.73

Down 15% percent today. I'll take that.

Ebay of latin america. Pure play on that markets future wealth. Longterm buy. I'd wait a few days to see if drops any further in real life before I'd buy. But in CAPS, I'll choose outperform now. I'd take at look at GMarket too.

fnu149 (< 20) Submitted: 10/24/2007 11:30:30 PM : Start Price: $39.13 MELI Score: +99.70

A long run play even though it's little expensive now.

lasindi (< 20) Submitted: 10/15/2007 5:40:53 AM : Start Price: $41.12 MELI Score: +93.15

One thing about this stock is obvious: Everyone investing in it is expecting it to be the eBay for the large Latin American market as it grows. This begs two questions: (1) Will it actually do that? and (2) Is the answer to (1) already baked into the stock?

(1) It would be great if someone who is from Latin America or knows it well could provide input on how likely this seems. That said, from my outsider's perspective, it seems like MercadoLibre is on track to become Latin America's eBay.

(a) They are making a profit and growing very fast.
(b) It's very hard to have more than one competitor in this space due to strong network effects.
(c) eBay has a 19.5% stake in them.

If someone else takes this market from MELI, eBay's investment will become essentially worthless, so I'm sure they thought carefully about which company to deal with. Their analysis is certainly worth more than any I can offer, so I will trust their judgment on this.
--------------------

(2) This question is much harder to answer. First off, their financials look fine: not that much debt, lots of cash, and a decent profit margin (5.4%). There isn't yet a whole lot of data or analysis on future profits available (or at least easy to find), but if you believe this article (http://biz.yahoo.com/ts/071009/10383537.html?.v=2) their forward P/E is about 76, and they have 148% growth, giving them an attractive PEG of 0.51.

Now, the following is a very rough way to guess at how much they could grow, but bear with me. Let's suppose that Latin Americans already using the Internet are using MercadoLibre as much as US Internet users use eBay. According to Internet penetration data internetworldstats.com, Latin America has about 20% penetration, while the US has 70%.

Now pretend that we wave a magic wand and the Internet is as pervasive in Latin America as it is in the US. That means 3.5 times more earnings than today for MercadoLibre, pushing its P/E down to about 22 (call this the "magic wand P/E"), which is pretty reasonable compared with eBay's forward P/E of 25.
--------------------

If what I've written to answer (2) is somewhat accurate in predicting MELI's value, I think it's certainly worth a buy. There are several big inaccuracies above:

* This is fully of rough and sloppy guesses. Better analysis from more experienced investors is very welcome here. :-)
* eBay is also benefiting from other emerging markets like India and China. However, in China, it is getting lots of competition from TaoBao.
* My "assumption" that MercadoLibre is gets the same per capita use amongst Latin American Internet users as eBay does in America is almost certainly very conservative. Latin Americans are not as affluent as Americans and thus have less money for online shopping. MercadoLibre likely also does not have the brand-recognition of eBay yet. This should push the magic wand P/E down much further, making this stock an even better buy.
* I've read that fraud is a big concern from Latin Americans and apparently some countries don't have the same legal protections against as perhaps Americans do. This may be, but if the demand for such online markets exists (and I see no reason why over the long run this shouldn't be), I think these countries will set up such safeguards.

Summing up, this is a risky stock, but I think the potential rewards are quite great. It has a high P/E, but this can be sustainable for such growth stocks (look at Google's P/E history: http://seekingalpha.com/article/31973-p-e-ratio-and-future-earnings-make-google-a-buy). If the stock goes up very quickly, I would keep an eye out for a speculative bubble (which may have already happened to some extent in recent weeks).

ghoad (< 20) Submitted: 10/12/2007 1:11:32 PM : Start Price: $44.34 MELI Score: +79.56

A latin marketplace partially owned by eBay. Recent IPO.

rhr1 (< 20) Submitted: 9/30/2007 2:46:41 PM : Start Price: $36.43 MELI Score: +114.44

Next quarters eps estimate and recent growth are in the triple digits. The market for this company should be wide open

seijin0201 (< 20) Submitted: 9/21/2007 9:59:35 PM : Start Price: $38.06 MELI Score: +105.54

Latin America's ebay.....ecommerce is just taking hold in this emerging market....partially owned by Ebay (great model to learn from)

Jaronovsky07 (< 20) Submitted: 9/21/2007 6:11:30 PM : Start Price: $29.21 MELI Score: +161.79

it is a well run company in a field where the opportunities for growth are nearly boundless. assuming its profits continue growing at the rate they are, the recent analyst estimates should be reached if not passed.

movavg (47.29) Submitted: 9/21/2007 6:37:21 AM : Start Price: $36.32 MELI Score: +115.12

Has the potential to become ebay for spanish speaking market

JackRyanUSMC (< 20) Submitted: 9/6/2007 3:14:25 PM : Start Price: $30.12 MELI Score: +154.28

It's gonna happen