MercadoLibre's Valuation Is Too Compelling To Pass Up, KeyBanc Says In Upgrade

The payments prospects for Latin American e-commerce marketplace Mercadolibre Inc MELI prompted KeyBanc Capital Markets to upgrade the stock this week.

The Analyst

Analyst Brad Erickson upgraded MercadoLibre from Sector Weight to Overweight and set a $350 price target.

The Thesis

The Latin American commerce and banking system is benefiting from technology after years of structural and regulatory impediments, Erickson said in an upgrade note issued after the analyst met with with several companies in Latin America's fintech, payments and e-commerce sectors.

The analyst sees room for multiple players to operate with success, with the total addressable market likely larger than the widely accepted estimate of 10-15 million merchants in Brazil alone.

MercadoLibre possesses a "unique go-to-market" with a highly established, two-sided marketplace platform that's widely known to a large number of Latin American consumers and merchants, Erickson said.

Although KeyBanc projects currency headwinds deferring upside in the near term, MercadoLibre's focus on payments as well as Erickson's confidence in the company's logistics and positioning versus Amazon.com, Inc. AMZN make the stock a compelling proposition, he said.

"We think we're on the doorstep of a meaningful narrative change, with investor focus shifting from marketplace growth and operational challenges to MELI's ability to capture and monetize the long tail of smaller merchants and consumers beginning to leverage electronic payments."