Bear Of The Day: MercadoLibre (MELI)

MercardoLibre, Inc. (MELI - Free Report) is getting hit by increased competition, especially from Amazon, in the online marketplace. This Zacks Rank #5 (Strong Sell) is expected to see an 88% decline in earnings in 2018.

MercardoLibre is Latin America's leading e-commerce company with its websites MercadoLibre.com and MercadoPago.com.

Big Miss in the Fiscal First Quarter

On May 9, MercadoLibre reported first quarter results but missed on the Zacks Consensus for the 4th consecutive quarter.

It posted earnings of a loss of $0.29 versus the $0.48 estimate.

There are multiple analysts covering this company so it's not like there's only 1 or 2 and they can't get it right.

The headline numbers looked great as gross merchandise volume surpassed the $3 billion market for the first time, up 34% year-over-year in USD and up 42.7% on an FX neutral basis.

It saw a 50.6% increase in the number of items sold to 80.1 million.

Unique buyers jumped 28%, driven by Brazil and Mexico, two of its largest markets while Colombia and Chile also delivered solid results.

Total payment volume through MercadoPago rose 60.5% in USD and 81.7% on an FX neutral basis.

Estimates Slashed for the Full Year

If everything was so good, why are estimates being cut dramatically?

Free shipping.

Amazon has entered into several of MercadoLibre's biggest markets, including Mexico. The company has to eat the difference as it rolls out free shipping.

In the first quarter of 2018 free shipping cost the company $112.5 million versus just $4.3 million in the first quarter of 2017.

The 2018 Zacks Consensus has fallen to $0.28 versus $1.93 just 2 months ago. By comparison, it made $2.53 in 2017 when it didn't have to pay for free shipping.

The analysts are also bearish on 2019 as 7 estimates were cut for 2019 as well, pushing the Zacks Consensus down to $2.35 from $3.55.

Shares Sink on Earnings Decline

The good news is that the underlying business is healthy in both the merchant category and in payments.

1 2
View single page >> |

Disclosure: I own shares of AMZN in my personal portfolio.

Disclaimer: Tracey Ryniec is the Value Stock Strategist for Zacks.com. She is also the Editor of the  more

How did you like this article? Let us know so we can better customize your reading experience. Users' ratings are only visible to themselves.

Comments

Leave a comment to automatically be entered into our contest to win a free Echo Show.