1 Growth Stock Down 15% to Buy Right Now

1 Growth Stock Down 15% to Buy Right Now

Free market (NASDAQ: MELI) It may not be a household name in the United States, but savvy investors know that this e-commerce stock has been one of the best performers in the online retail sector throughout its history. history.

In fact, it is even outperformed Amazon since its IPO in 2007, and both stocks have eclipsed the returns of S&P500 during this period.

1 Growth Stock Down 15% to Buy Right Now

MELI Graphic

Like much of the e-commerce industry, MercadoLibre’s stock plunged in 2022 during the bear market, but unlike most of its e-commerce peers, MercadoLibre’s business continued to show strong growth, demand continuing to increase even after the tailwinds of the pandemic. had passed.

MercadoLibre has rebounded since then, recouping much of those losses, but the stock is still down about 15% from its pandemic-era peak. With the S&P 500 and Nasdaq Composite back at record highs, it seems reasonable to expect MercadoLibre stock to reach new highs as well.

Let’s take a closer look at MercadoLibre and why the stock is a buy today.

A woman buys clothes onlineA woman buys clothes online

Image source: Getty Images.

What is MercadoLibre?

MercadoLibre is best known as an online retailer, but its business is much more than that.

The company operates as a direct online retailer, selling products it owns through its website, and operates a third-party marketplace, allowing individual sellers to sell merchandise on its platform, for which it earns a commission. It’s the same e-commerce model that made Amazon successful.

MercadoLibre operates throughout Latin America, but almost all of its business comes from Brazil, Argentina and Mexico. Brazil is its largest market, accounting for around half of its revenue.

In addition to its core e-commerce business, the company also owns MercadoPago, a digital payments and fintech business, which has arguably become the most valuable part of the business. In addition to serving as a payment platform, MercadoPago also offers point-of-sale devices to merchants in physical stores in Latin America, where digital payment technology is not as developed as in the United States. This activity allowed MercadoLibre to tap into the huge physical retail market in Latin America.

In addition to its two main businesses, e-commerce and fintech, the company also runs its parcel delivery service, MercadoEnvios, strengthening its competitive advantage since most of its sellers use MercadoEnvios to ship their orders. Finally, the company also has its own lending business, MercadoCredito, which lends money to its sellers and other borrowers, as well as an asset management business called MercadoFondo.

Like Amazon, MercadoLibre has built an interconnected network of companies that complement each other and create a vast economic divide. Not only is MercadoLibre growing rapidly, but its margin is also increasing. The company has proven itself against competitors such as Amazon and Sea LimitedIt’s Shopee.

Is MercadoLibre a growth stock?

MercadoLibre has been one of the fastest growing stocks in the e-commerce sector, and this trend was evident in the first quarter.

Revenue increased 36% to $4.3 billion, and 94% on a currency-neutral basis, as the devaluation of the Argentine peso impacted reported results. Gross merchandise volume increased 71% on a currency-neutral basis to $11.4 billion, and total payments volume jumped 86% currency-adjusted.

Operating margin stood at 12.2%, up 120 basis points after adjusting for year-over-year comparisons.

MercadoLibre is growing rapidly and the company has plenty of room to grow in Latin America, further penetrating the region and creating new businesses.

Why MercadoLibre Stock is a Buy

The company has a long history of outperforming the stock market and gaining market share, and its profit margin is increasing through complementary businesses such as advertising and credit and by expanding its core businesses, such as trading and MercadoPago.

With the profit margin improving, the stock looks as cheap as it has ever been, at a Forward P/E of 50. Investors can take advantage of the discount from its peak by buying the stock now.

Should you invest $1,000 in MercadoLibre right now?

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John Mackey, former CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. Jeremy Bowman holds positions in Amazon, MercadoLibre and Sea Limited. The Motley Fool holds positions and recommends Amazon, MercadoLibre and Sea Limited. The Motley Fool has a disclosure policy.

1 Growth Stock Down 15% to Buy Now was originally published by The Motley Fool

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