Monster earnings report from Mercado Libre — the “Amazon” of Latin America – The Average Joe
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    Monster earnings report from Mercado Libre — the “Amazon” of Latin America


    August 4, 2022

    MercadoLibre (NASDAQ:MELI) — the “Amazon” of Latin America — reported a massive quarter that sent its stock up 16% yesterday.

    • Net income jumped 80% from the same year in 2022.
    • Total sales grew 57% (excluding FX impacts) — carried by its fintech arm.

    What’s the big deal? In North America, payments and e-commerce are two industries that have slowed significantly since an initial COVID burst. But things are slightly different in South America — where growth hasn’t tapered off as much.

    Many Latin Americans lack access to basic banking services, and e-commerce is a smaller portion of total retail.

    • Latin America: E-comm sales make up 5% of total retail sales by one estimate.
    • United States: E-comm sales make up 14-20%, depending on the measurement method.

    But here’s where it gets interesting.

    Mercado’s fintech arm grew a massive 113% in the recent quarter. Fintech now makes up 46% of its business compared to 33% a year ago.

    • Old Mercado: E-commerce biz with a tiny but growing fintech arm.
    • New Mercado: Fintech biz with a strong e-commerce arm.

    This matters because fintech businesses are traditionally more profitable. It’s also less operational heavy and capital intensive than Mercado’s e-commerce business, which requires warehouses and physical infrastructure.

    How cheap is Mercado? By the valuation metric price-to-sales ratio, Mercado Libre hasn’t been this cheap since 2008. Mercado is still (relatively) small compared to other big tech giants. With a $52B market cap — Mercado is a fraction (~3.6%) of Amazon’s size — giving it plenty of room to grow.

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