MercadoLibre Poised For 30% Upside As Gross Merchandise Value And Payment Volume Surge, Says Goldman Sachs

MercadoLibre Inc MELI is expected to report its third quarter 2024 in late October/early November.

MercadoLibre operates online marketplaces dedicated to e-commerce and online auctions. 

The analysts estimate adjusted EPS of $10.55 with revenues of $5.25 billion, as per data from Benzinga Pro.

Goldman Sachs anticipates MercadoLibre will deliver another strong performance in the third quarter of 2024, driven by robust growth in gross merchandise value (GMV), which is expected to boost its e-commerce market share.

Additionally, the firm sees continued expansion in total payment volume (TPV) and its loan portfolio. The bank expects local currency GMV growth to exceed 30% year-over-year in Brazil and Mexico, with significant acceleration in Argentina.

However, the analyst notes potential slight pressure on margins due to new logistics facilities launched during the quarter, particularly in Brazil, which are still scaling. The analyst's EBIT projection of $749 million is slightly higher than the consensus of $740 million, attributing the difference to stronger GMV growth, although margins are expected to be slightly lower (13.9% vs. the consensus of 14.4%).

The analyst maintains the Buy rating on MercadoLibre, with a +30% potential upside to the price target of $2,620.

The analyst projects MercadoLibre’s total gross loan portfolio to reach $7.6 billion by year-end 2025 and $9.4 billion by year-end 2026 (vs. $4.9 billion as of 2Q24), with credit cards reaching 46% and 51% of the average annual loan book in 2025/26.

Since 4Q23, MercadoLibre has been issuing around 1.6 million new cards per quarter in Brazil and adding, on average, $325 million to its consolidated credit card book.

The analyst highlights that the management feels comfortable with this pace of origination; MercadoLibre's credit operation has always operated with risk management parameters that balance profitability rather than growing at any cost.

Price Action: MELI stock is down 0.51% at $2,037.47 at last check Thursday.

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