The share of mercadoLibre (WKN: A0MYNP) has been a remarkable growth story in recent years. Within the past year alone, the share price of this Latin American e-commerce player and now also payment service provider has almost doubled. A successful development in an overall solid overall market.
In my eyes, this performance could be just a small taste of what’s coming here, despite all the competitor risks and common growth and valuation concerns. Even a five-fold increase in price could be possible given the current valuation at run $ 32.7 billion. At this point, the Latin Americans would eventually weigh around $ 160 billion, which would still be small compared to larger, western or Asian-dominated online retailers.
With this in mind, let’s take a foolish look at important points that may become relevant here. Because such a course-related timetable would also like to be operationally supported.
The course in e-commerce
In principle, such a performance should be based on two main pillars. On the one hand, classic e-commerce, with which Latin Americans grew up initially. Secondly, in the area of payment services, but more on that later.
MercadoLibre is already growing rapidly in the field of e-commerce. Goods totaling over $ 3.6 billion have changed hands each quarter. A current starting point shows that MercadoLibre is already established with annualized merchandise volumes of over $ 14 billion, but it could still have plenty of room for growth. The quarterly sales of EUR 603 million, which are primarily based on the e-commerce sector, also allow such a conclusion. Establishment and opportunities will also be further indicators that we now want to focus on.
MercadoLibre has very different starting positions in the respective main markets of Latin America, which primarily include Brazil, Argentina and Mexico. In Brazil, more than half of the e-commerce sales are generated with 390 million euros, Argentina and Mexico, however, with 116.2 and 71.4 million euros. However, growth is stronger in the comparatively small markets. In Mexico, sales grew by 146% in the third quarter, Brazil and Argentina reached 77 and 39%, respectively, which contains an interesting mix of exciting growth and leadership. Exactly establishment and a small starting position with partly clearly three-digit growth, which still indicates a dynamic growth story.
MercadoLibre also continues to grow in quality. With the help of Mercado Envios, the Latin Americans also want to rock e-commerce logistics in the future, which leads to a leading online retail package. That could keep competitors at a distance and lead here to a larger moat, which itself keeps the established competition at a distance.
The second mainstay: payment
But in addition to this main business area, e-commerce, the payment services segment also attracted attention with exciting growth figures. In the third quarter, transaction volumes increased to $ 7.6 billion, which is over $ 30 billion annually. The latest growth rate of 94.5% also indicates a gigantic, albeit only beginning, dynamic.
With Mercado Pago, the payment service provider, MercadoLibre is also taking the step towards an overall e-commerce package. Many consumers in the Latin American market have so far not had access to common accounts and the payment service provider has closed a necessary gap accordingly. However, the area develops its own dynamic.
More and more consumers are gradually beginning to process third-party transfers and payments via Mercado Pago, which may make this brand a separate area. In any case, growth is rapid and should Mercado Pago become an independent financial service provider, possibly a leader in Latin America, a revaluation should also take place here.
At any rate, the current annualized transaction volumes, strong growth and foreign transactions show that this area should not be underestimated. As well as possibly becoming an important course driver in the coming years and possibly decades.
Two future companies in one
Many do not really trust the Latin American market because inflation and little stability shape the market environment here. However, if we ignore these concerns, the bottom line is a company that serves two megatrend markets with e-commerce and payment services.
This can not only result in strong growth, but may also make the current valuation of just under $ 33 billion look relatively inexpensive. If the scenarios outlined above work, one or the other course doubling could be lurking here. And even after that, there might still be a Latin American discount.
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Vincent owns shares in Mercadolibre. The Motley Fool owns shares of and recommends MercadoLibre.
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