Latin America is one of the fastest-growing regions on Earth with its 650 million people, and its burgeoning technology sector offers the potential for outsized returns for investors comfortable with emerging markets. The opportunity to buy shares in the Latin American version of Amazon, eBay, Paypal, Venmo, or Shopify certainly sounds like an attractive entry to the region. What if there was a company that was essentially a rollup of all those companies in one, built and operated in Latin America? Such a company not only exists but has been a growth monster returning over 264% in the past five years and 3,418% since coming public in 2007 and its name is MercadoLibre, Inc. (NASDAQ: MELI).
MercadoLibre operates throughout Latin America and has operations in Argentina, Uruguay, Bolivia, Chile, Brazil, Mexico, Spain, Colombia, Costa Rica, Dominican Republic, Peru, Panama, Honduras, Ecuador, and Venezuela. The company trades in the U.S. on the Nasdaq and is headquartered in Buenos Aires, Argentina.
The company operates five business units including Marketplace, which is a platform for users to sell goods, Mercado Credito which offers lines of credit, an online payment platform called Mercado Pago, and Mercado Shops for users to set up digital storefronts, and Mercado Publicado for digital advertising. The Mercadolibre ecosystem essentially allows users to buy, sell, pay for, advertise, and finance just about any product that can be sold online.
MercadoLibre is simply a sales monster, with $7.07 billion in revenue and $653.29 million in EBITDA generated during 2021. Even with its historical compound annual growth rate of about 70%, the analyst community still expects the company to generate sales growth of 37.6% in 2022 and 31.5% in 2023. Only 11 analyst firms provide coverage, so the company still is somewhat unknown despite having a $53 billion market capitalization, perhaps because its operations are outside the United States.
Like most growth stocks, MercadoLibre has been beaten down in 2022 and is down more than 24% YTD. General market malaise provides savvy investors an opportunity to pick up shares of a market-leading growth powerhouse that serves a rapidly developing and massive segment of the world. The company had 139.5 million unique active users, which is huge but still has plenty of room to go to further penetrate the region’s 650 million residents.
The company certainly faces competition from global behemoths like Amazon and Alibaba but as well as smaller Latin American-based companies, but it has a big moat from being a homegrown platform that has served the market since 1999. Combining the capabilities of companies like Amazon, Paypal, eBay, Shopify, and banking and credit services makes MercadoLibre the undisputed king of Latin America that looks to continue its rapid ascension in an important emerging region.
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