MELI: Revenue Up 49%, Stock Down 40% — in a High-Growth Stock is the Dip an Entry Point?

This is the type of post this thread needs.  There is a big value disconnect that will unwind in a few years - a great entry point.

The issue is I am not buffet and I don’t know if I want to wait out the bulletproofing.

Yeah this is GOOG $100-160 levels of cheap. People will be kicking themselves when the stock will be worth $5000+

It looks like a great company. However, the trend is still down. Once it goes sideways, I'm in.

What about the moat? Someone joins MELI for a cheap purchase, subscribes to Meli+ for free shipping and streaming, pays with a Mercado Pago balance that earns yield, picks up the credit card — A flywheel

Just added more. It’s my emerging market play and I feel great holding it. Would be concerned if they weren’t investing in their business.

What about 999? 900? 800? If you waited until it was multiple months removed from a downtrend you could have still picked it up around $850. It’s not 700, but it’s better than you buying at 1000 because “that’s a discount” and then waiting and seeing it go so much cheaper with less capital to deploy towards the next dip.

Solid write up. You and I have talked about MELI before, and I completely agree that the stock is very attractive at 1600.

The only part I would somewhat push back on is that the market is pricing this like a slow retailer. Comparing the valuation of MELI to WMT (the textbook example of slow, steady retailer), MELI is still at more than double the price/sales of WMT, even at a time where Walmart shares are trading at a blisteringly expensive price relative to what you're getting. You still need growth in the future to make the stock work from here.

That said, I think you're getting a hell of a deal at today's price, as long as you believe margins will eventually stabilize in the low double digits. At my best estimate of "look through" earnings (basically assuming they go into steady state and stop investing for growth, thus expanding margins), MELI trades at roughly 15-20x EV/EBIT on mature margins. If you believe my assumptions, that is dirt cheap for a company who can grow by almost 50% while still remaining profitable through the investment cycle.

I bought a first position at 1530 recently.

3 more rounds in the chamber with an open buy order at 1350 for the first.

That's how i've started rotating in these "falling knives". It works well for me cuz i don't like to buy when a stock goes up. And yes I know that's a bad mental model, hence the strategy above.

nice write up thanks

The current US president is actively manipulating the stock market and openly insider trading. After trying to violently overthrow the government because he lost an election

Something no one has mentioned which dictates the stocks movements more than anything is the credit provision ratio. It has been increasing faster than the credit card growth would have implied, and there are some potential signs that the Brazilian credit cycle may be turning on a macro scal4. The market is worried meli is making credit loans their customers won't actually pay back because the interest rates are eye watering on weaker consumer strength. Meli needs to slow their credit growth materially without a large slowdown in gmv growth before the market takes them out of the penalty box. The higher interest rates for longer in Brazil definitely aren't helping either.

Thanks! I usually post about high growth stocks at profitability infection or during dips

There's a clean rotation pattern in the Form 4s here. Three executives sold \~$2.3M at $2,027-2,048 in December (Tolda, Calemzuk, Dubugras). Then Alejandro Aguzin bought $993K back at $1,655-1,656 on May 22, and CAO Melamud added $100K at $1,756 in February. What caught my attention is Aguzin specifically. He's been a net seller at MELI historically (\~$7M over time), so this buy reads as a behavior shift, not routine accumulation. He's about 5% underwater right now. They nailed the sell at $2,000. The jury's still out on the buy.

The problem with MELI is Brazil. If you believe in Brazil, there is no reason to buy MELI stock. Just buy Brazilian bond's which guarantee \~12% returns per year. There is no reason to take the risk of buying stocks when bonds are paying that higher.

I think most investors don't bet in Brazil at all. I don't blame them. I'm Brazilian myself, and I would never buy a Brazilian stock right now with interest rate this high.

Even cards are typically going to individuals paying microloans as you said, its worth watching the 8% early delinquency rate, though it’s been trending down over the past 3 quarters

Yeah, constant struggle. My solution: A small weekly saving plan that is not really substantial, but solving the "itch" to add more at these levels. 😃

P/E of 42, this is not value priced imo

Agree. Great entry point for both

Yeah and it busted through the ~1700 resistance point.  Now it is looking to test right around 1520.  It isn't done dropping regardless of the companies quality.

The projection of the active buyers and fintech users is just ridiculous: https://app.rast.guru/?company=MercadoLibre

The company's booming, the valuation almost doesn't matter, the growth is so strong that even if it were overvalued, it would remain like that for years to come

I'm a us citizen, but I currently live in Peru, and have lived in south America for a very long time. I think your thesis on "horribly unstable governments" is wrong. Are they as stable as us, Canada, and most of Europe? Probably not, but they're more stable than much of the world (besides Venezuela and Cuba). Many countries in south America actually have strong and stable governments.

Also, I don't think that they need to move into the United States to become huge.

Latin America has a young, growing, population with around 700 million people. The digital revolution of banking apps and e commerce is still just starting to take hold. They don't really need to enter the United States, because their runway is still absolutely enormous in latin America.

In latin America, many countries are growing their gdp faster than the United States, urbanization is still occuring, the middle class is growing rapidly, and these countries are still cash based societies moving to cashless rapidly. All of these are huge growth opportunities for meli.

Mercado libre doesn't need to be some insane hyoerscaler, or enter the United States, to produce strong growth, it just needs to be good enough to continue capturing the latin American market, grow e-commerce, and be disciplined in their financial products.

I don't own meli stock, yet. Just my experience and thoughts as an American that uses mercado libre.