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MercadoLibre Soars to Best Start Ever After Americanas Crash

The recent problems at Brazilian retailer Americanas SA are actually helping MercadoLibre Inc., whose stock price is poised for its best January since the company went public in 2007.

January 25, 2023
2 minutes
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The recent problems at Brazilian retailer Americanas SA are actually helping MercadoLibre Inc., whose stock price is poised for its best January since the company went public in 2007.

Shares of the Buenos Aires-based e-commerce retailer and fintech provider are up roughly 31% this year on optimism that the company will gain market share after its Brazilian rival filed for bankruptcy protection. The Brazilian company was saddled with debts of 43 billion reais ($8.4 billion), which likely doomed its chances of competing against its Argentine counterpart.

According to Goldman Sachs Group Inc. analysts led by Irma Sgarz, companies that sell goods through Americanas may now question that relationship, potentially increasing MercadoLibre’s bargaining power. The bank’s channel checks signaled that some Brazilian suppliers are already adjusting terms for Americanas, with sellers also removing promotions or raising prices given the uncertain scenario.

E-commerce firm shares are up this January compared to 2007 when the company first went public. This is good news for shareholders.

Sgarz wrote in a note dated Jan. 23 that there is potential for share gains.

Investors are pricing in the end of the US interest-rate hiking cycle and beginning to factor in a potential political change in Argentina, which could boost the stock price. Malcolm Dorson, a portfolio manager at Mirae Asset Global Investments in New York, notes that Argentina has presidential elections in 2023.

Dorson believes that emerging-market stocks are a good investment at the moment and that MercadoLibre is a particularly strong company. He has been holding shares in the company since 2019 and expects its earnings momentum to continue.

MercadoLibre has been gaining market share in Brazil for some time now, thanks to its heavy investments in developing its logistics network. For example, the company was able to grow its Black Friday sales last year while most of its competitors retreated.

The company's net revenue is expected to reach a record $3 billion in the fourth quarter, an increase from $2.7 billion in the third quarter, according to Bloomberg's consensus estimate. Gross merchandise volume and total payment volume are projected to be $9.4 billion and $35.6 billion, respectively.

"MELI has created a very strong e-commerce ecosystem, one that is much better than most of its competitors," said Ignacio Arnau, a Madrid-based fund manager at Bestinver Asset Management. "In Brazil, MELI is continuing to pull ahead of the pack, and the recent Americanas debacle should help them maintain their leading position."
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