The stock of MercadoLibre (MELI) – an Argentine technology company and the largest e-commerce company in Latin America – has shown extreme volatility over the past year, due to various major and tail winds that affected the stock during the period.
The US Federal Reserve’s monetary policy has been a major driver of stock price performance, as well as the company’s chain of operations, acquisition strategy, and partnerships with other brands to combat counterfeiting and piracy in the Latin American region.
The company’s stock price took a gradual upward trend from April 2020, nearly two months after the Covid-19 pandemic tightened its grip around the world. This rise can also be attributed to a 45.2% increase in the number of unique active users for the company, which reached 51.5 million users in the second quarter of 2020.
The company, which had a market capitalization of $58.83 billion as of January 13, has reported a strong increase in the number of unique active users over the course of the quarters since then. This rise in the company’s user base may be due to the strong shift towards e-commerce consumption during the pandemic, as most people were stuck at home and thus relied heavily on internet-based services.
What’s next for this e-commerce stock in 2022? Let’s take a look at a detailed MELI stock analysis to help you make a reasonable MercadoLibre stock forecast.
MELI Stock Analysis: MercadoLibre Performance in 2021
Despite hitting an all-time high of $2,012.8 in January 2021, it hasn’t been an easy year for MELI, which has seen huge price swings. It eventually fell 33.10% on the one-year price chart.
In contrast, the Nasdaq Composite Index, where the stock is listed, is up 16.19% over the same period, as of January 13, 2022.
The main reason behind this drop in the company’s share price may be the Federal Reserve’s (Fed) plans to scale back its bond-buying program.
The stock has seen a gradual decline in its price since September 2021, after the Federal Open Market Committee (FOMC) indicated in its September 22, 2021 statement that “moderation in the pace of asset purchases may soon be warranted.”
As of September 30, 2021, the company had $765.14 million of short-term debt and $1.97 billion of long-term debt. If returns rise in the coming months, MercadoLibre can increase borrowing costs and increase financing expenses, which will increase cash spending to service the company’s loans.
MercadoLibre stock closed at $1,210.91 on January 12. Taking a look at MercadoLibre’s historical stock prices, the stock is up 586.26% over the past five years (as of January 13th).
MercadoLibre Fundamental Analysis: What does the company’s earnings for 2021 show?
MercadoLibre expanded its net loss after tax for the first quarter ended March 31, 2021, to $34.012 million from $21.109 million a year earlier. The company’s net revenue rose to $1.378 billion from $62.091 million during the same period. Loss per share, basic and diluted, also widened to $0.68 from $0.44 in the quarter ended March 31, 2020.
The main reason for the increased loss may be the company incurring a foreign currency loss of $15.1 million in the first quarter of 2021. This is due to the additional cost of accessing the US dollar via an indirect mechanism in Argentina. The Argentine government’s restrictions on buying US dollars at the official exchange rate led to an additional cost.
For the second quarter ended June 30, 2021, the company reported net after-tax income of $68.195 million, up from $55.947 million in the prior-year quarter, improving basic and diluted earnings per share (EPS) to $1.37 from $1.11 during the quarter. the first. a period. Net revenue increased to $1.702 billion in the second quarter of 2021 from $878,369 million in the previous year.
The rise in net revenue in the second quarter of 2021 was a result of the company’s gross merchandise volume (GMV) growth to $7 billion, up 39.2% on a USD basis and 46.1% on a neutral FX basis. Total mobile merchandise volume was up 218.2% on a FX-neutral year-over-year basis, coming to 73.4% of GMV in the said quarter.
MercadoLibre reported net income after tax of $95.225 million in the third quarter ended September 30, 2021, up from $15.035 million in the prior-year quarter, improving basic and diluted earnings per share to $1.92 from $0.28 during the period.
Net revenue jumped to $1.857 billion in the third quarter of 2021 from $1.115 billion a year earlier. The revenue increase came as a result of the company’s GMV rising to $7.3 billion, indicating an increase of 23.9% in the US dollar and 29.7% on a FX-neutral basis. Gross cargo volume was 74.1% of GMV in the third quarter of 2021.
MELI stock news and major price drivers
On the positive side, 2021 has been strong in terms of company expansion.
First, the company acquired Chilean payment services provider Redelcom in December 2021 and Brazilian logistics company Kangu in August 2021.
The acquisition of Redelcom places MercadoLibre in a strategic position to strengthen its payment systems operations as the company looks to enhance its value proposition in Chile and drive the growth of multiple payment instruments and digital financial solutions. The company seeks to expand its corporate business in Chile through acquisitions, especially for small and medium-sized enterprises (SMEs) and entrepreneurs.
The acquisition of Kangu will allow MercadoLibre to increase its investment across its logistics network to increase vendor efficiency, reduce delivery times and expand capacity in its Mercado Envios logistics arm. Kangu has more than 5,000 collection and delivery points in Brazil, Colombia and Mexico, which MercadoLibre plans to take advantage of.
Second, the company led a round of inaugural bond offerings in January 2021 and a round of stock offerings in November 2021 to attract significant capital.
On January 8, 2021, the company priced its public offering of $400 million, 2.375% bonds due 2026 and $700 million 3.125% bonds maturing 2031, the company’s first offering of debt securities. The 2.375% bond due 2026 is secured by a sustainable bond. The Company planned to use the net proceeds from the sale of the bonds to partially or fully finance or refinance its new or existing eligible projects.
On November 16, 2021, MercadoLibre priced a guaranteed public offering of one million shares of common stock at a public offering price of $1,550 per share, for total proceeds before underwriting and expenses of $1.55 billion. The company did not reveal where it plans to use the proceeds from the show.
On the downside, the company’s large holdings of short and long-term debt may pose a problem for the stock. A company’s borrowing costs may rise if the US central bank lowers its asset purchase rate further.
MercadoLibre (MELI) Stock Forecast: What are the analysts’ sentiments conveying?
Is MELI stock “buy”, “sell” or “hold”? MarketBeat analysts shared various price targets for MercadoLibre stock as of January 13th. 11 out of 13 analysts covering the stock rated it a “buy”, and two gave it a “hold” rating. These analysts include UBS Group, Citigroup, Credit Suisse, HSBC, Barclays, Morgan Stanley, JPMorgan Chase and Bank of America.
MELI’s 12-month stock price target, by consensus, was $1,943.08. It had a bullish probability of 60%, based on the closing price of $1,210.91 on January 12. The outlook for the stock varied from a low price target of $1,250 to a high of $2,250.
Among the latest ratings, Stifel Nicolaus lowered his MELI price target from $2,200 to $1,600, and Jefferies Financial Group lowered the rating from “buy” to “hold.” Stephen Jo of Credit Suisse and Trevor Young of Barclays shared a positive outlook, boosting the stock’s target from $2,100 to $2,200.
Commenting on MercadoLibre’s future prospects, Danny Hewson, a financial analyst at AJ Bell, told Capital.com:
“Many investors don’t like growing stocks now because higher interest rates in the US is definitely around the corner. But even with the changing economic environment, MercadoLibre has a lot to recommend as part of a long-term strategy. While consumers are back home in America Latinos have been hit hard by the covid virus and high inflation, yet they managed to increase sales at an impressive rate over the past year.
“While 2022 is expected to bring more volatility, the e-commerce business will continue to grow, and bargain hunters keeping an eye on the future may tempt the current share price. Ultimately, investors need to consider whether the company will be more or less important in the course of time. A few years back – and with the world increasingly dependent on the digital space for just about everything, there is no doubt that this is a business with opportunities.”
According to MercadoLibre’s algorithm-based stock price forecast from Wallet Investor, as of January 12, 2022, MELI could reach an average price of $1,460.25 by the end of December 2022.
In the long-term, Wallet Investor’s MercadoLibre stock forecast indicated that the stock could reach $1,934.12 by the end of December 2023, $2,417.07 by the end of 2024, and $2892.84 by the end of 2025. Although the service did not provide price targets for 2030, it indicates MELI’s five-year stock forecast says the price could reach $3,394,260 in January 2027.
When researching MercadoLibre stock forecasts, it’s important to keep in mind that analysts’ predictions may be wrong. The projections are based on fundamental and technical studies of the performance of the MELI stock. Past performance is not a guarantee of future results.
It is important to do your research, and remember that your decision to trade depends on your attitude to risk, your experience in the market, the spread of your investment portfolio, and how comfortable you are about losing money. You should never invest money that you cannot afford to lose.
questions and answers
Is MercadoLibre stock a buy or a sell?
Opinions differ among analysts. A consensus view compiled by MarketBeat as of January 13 suggested the stock could rise to $1,943.08 over the next year. However, some believe that it could actually reach $2,250 within 12 months, while others fear that it could trade at $1,250.
Why did MercadoLibre stock drop?
The stock may have fallen due to the US Federal Reserve’s plans to scale back its bond-buying program and raise benchmark interest rates this year.
Will MELI stock go up?
It is impossible to say for sure. The stock has been very volatile over the past year. While the consensus view of analysts (as of January 13th) was that the stock could rise this year, that view may be incorrect.