MercadoLibre Shares Surge to Record High on Strong Earnings

(Bloomberg) — Shares of MercadoLibre Inc. rallied after the Latin American e-commerce and fintech giant’s profit far surpassed estimates.

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Net income in the fourth quarter was a record $639 million compared with a $406 million median estimate from analysts, according to data compiled by Bloomberg. The $6.1 billion of revenue in the quarter also beat expectations. The stock jumped as much as 12.5% at the open of trading in New York.

The strong finish to the year comes after a third quarter that disappointed investors prompting a selloff after multiple profit metrics missed on the back of increased investments in logistics and credit. Shares in Latin America’s most valuable company, with a market value of about $119 billion, have rebounded strongly, gaining 37% year-to-date.

“It was a very good quarter. We thought we had a very good quarter last quarter as well. It doesn’t go in a straight line,” Chief Financial Officer Martin de los Santos said in an interview. “This was probably the best year in our history in terms of financial results, operational results, the improvements that we have made on the product.”

MercadoLibre’s full year profit jumped to $1.9 billion in 2024 on $21 billion of revenue, which rose 38% year-on-year, according to the release.

For the fourth quarter, while gross merchandise volume of $14.5 billion came in below estimates, the total payment volume of $59 billion was largely in line with expectations.

The company which gets the bulk of its business from Brazil, Mexico and Argentina grew its assets under management to $10.6 billion and its credit book to $6.6 billion with the credit card portion of the portfolio more than doubling in the past year, according to a press release.

Still, MercadoLibre executives said in a call with analysts that they’re remaining cautious on credit given macroeconomic uncertainty in Brazil where interest rates are set to climb further.

In Argentina, where President Javier Milei is undertaking dramatic spending cuts and reforms to try to quash inflation and stabilize the economy, MercadoLibre has “quadrupled” its credit book in the past year through loans for consumers and merchants, de los Santos said. Though the company isn’t yet ready to begin offering credit cards in that market, he said.

“Management reiterated its strategy of investing to drive sustainable long-term growth, which should drive some margin gains over time, but could come with quarter-by-quarter volatility,” Goldman Sachs Group Inc. analysts led by Irma Sgarz wrote in a note.

Unique active buyers on the commerce platform rose to 67 million people while monthly active fintech users jumped to 61 million.

The advertising unit, one of its newest and fastest growing businesses, rose 41% year-on-year to reach 2.1% of GMV.

“While we encourage investors to await a better entry point, the name remains in the early innings of an enviable growth narrative, a recognizable business model and blueprint, and an ever-deepening economic moat,” Sean Dunlop, an analyst at Morningstar Research Services LLC, wrote in a report.

The company has 25 buy recommendations, one hold and one sell, according to data compiled by Bloomberg. The 12-month price target stands at $2,410 per share compared with the latest price of $2,325. At least five analysts raised their price target after the earnings release.

The firm, which has about 84,000 direct employees, exceeded the mark of 100 million annual active buyers on its commerce platform during 2024, logging 57 purchases and 360 transactions every second, according to the release.

MercadoLibre has “weathered numerous ‘show-me’ moments in its recent history, often doubling down on capital allocation decisions that sparked doubts and triggered sharp sell-offs in its stock,” Itau BBA analysts led by Rodrigo Gastim wrote in a note. “Yet, the common denominator has consistently been its ability to exceed return expectations, often followed by strong recoveries in stock performance. Guess what – they did it again.”

(Adds Friday stock trading in second paragraph, analyst comments throughout.)