Online retailer MercadoLibre (MELI) sits solidly in a flat base with the company’s earnings report around the corner.
Sometimes referred to as the Amazon.com (AMZN) of Latin America, MercadoLibre operates the largest online marketplace in Brazil, Mexico, Argentina and 15 other Latin American countries. It reported 57 million unique active buyers on its e-commerce platform as of June 30. And its Mercado Pago payment platform and digital wallet service had over 52 million monthly active users at the end of June.
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The IBD Sector Leaders name is also on the IBD Leaderboard. The stock holds the top spot out of 60 stocks — even beating fourth-place Amazon — in the IBD Retail-Internet industry group.
On Thursday, UBS raised its price target to 2,400 from 2,300 and maintained its buy rating on the stock. Shares reversed higher Thursday.
MercadoLibre Stock Sets Up Ahead Of Earnings
MercadoLibre pulled back from September’s record high and began forming a flat base with a 2,161.73 buy point. Price action is tightening up, a positive sign.
The online retail stock is testing its 10-week moving average and finding resistance, according to MarketSurge chart analysis.
Its relative strength line dropped from September highs and is leveling out.
Q2 Profit Growth Tough Act To Follow
MercadoLibre reported second-quarter profit of $10.48 a share for a surge of 103%. FactSet’s Q3 earnings estimates call for $10.59 a share, or a 48% rise, in earnings, while estimates show a 214% EPS pop for the holiday quarter.
Analysts have raised their 2024 profit forecast to 94% and 34% for 2025. This follows a 104% lift in 2023 earnings and 2022’s explosive 471% jump. The enviable growth helped the e-commerce stock earn a best-possible 99 IBD Earnings Per Share Rating.
Its Q2 total payment volume increased 36% while gross merchandise volume grew 20%.
Sales growth has been fairly consistent over the last eight quarters, averaging around 41%. MercadoLibre reported that 55% of its Q2 revenue came from Brazil and 23% from Mexico.
Sales Growth Estimates Remain Solid
Third-quarter revenue forecasts call for $5.277 billion, equaling 40% growth. Sales projections show growth of 18% to 40% over the next four quarters. The company is expected to report its Q3 results on Wednesday.
Mutual funds have bolstered their positions in the online retail stock, with 3,095 owning shares in September, up from 3,057 in June. Six high-performing IBD Mutual Fund Index names own MercadoLibre, including Fidelity Contrafund (FCNTX) and JPMorgan Large Cap Growth Fund (SEEGX).
The stock holds a 97 Composite Rating.
Follow Kimberley Koenig for more stock market news on X/Twitter @IBD_KKoenig.
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