5. MercadoLibre Inc. (NASDAQ:MELI)
Number of Hedge Fund Holders: 87
By the end of 2023, there were over 218 million active customers and 1 million active merchants in 18 countries using MercadoLibre, Inc. (NASDAQ:MELI)’s fintech solutions and commerce network, making it the largest e-commerce marketplace in Latin America. The firm runs several businesses that complement its main online store. Its turnkey e-commerce solution (Mercado Shops), shipping solutions (Mercado Envios), payment and financing operations (Mercado Pago and Mercado Credito), classified ads (Mercado Clics), and advertising are all part of its arsenal. The company’s revenue streams include advertising royalties, final value fees, subscription fees, insertion fees, payment processing, and interest income from loans to consumers and small businesses.
MercadoLibre, Inc. (NASDAQ:MELI) reported strong GMV growth in key markets in Q3 of 2024, with GMV rising 34% YoY in Brazil and 27% in Mexico, driven by improvements in market share in both countries. In order to prove its expanding client base, the firm also added a record 7 million new customers, exceeding the peak figures attained during the pandemic.
The business increased fulfillment penetration by 4.5 percentage points in Q3 by opening 6 new fulfillment centers for improved logistics. The company’s credit card business also saw tremendous growth, with 1.5 million new credit cards authorized and a 166% increase in the total payment volume (TPV) for credit cards year over year.
In Q3 of 2024, MercadoLibre, Inc. (NASDAQ:MELI)’s revenue increased by 35% over the previous year, and the company’s EBIT, which showed a 10.5% margin, was $557 million. The company also improved customer engagement and retention by introducing new tier options and the MELI+ benefits package to its loyalty programs.
Lakehouse Global Growth Fund stated the following regarding MercadoLibre, Inc. (NASDAQ:MELI) in its November 2024 investor letter:
“The Funds largest position, Latin American e-commerce leader MercadoLibre, Inc. (NASDAQ:MELI) delivered another impressive quarterly result. Net revenue grew 35% year-on-year to $5.3 billion, while operating profit declined 29% to $0.6 billion as management made the decision to reinvest some profits back into the business. This reinvestment was primarily to accelerate growth in the company’s credit offerings and continue the expansion of their logistics network, driving faster delivery times and lower per-unit shipping costs. Whilst such a move will depress margins in the near term, we don’t view it as a negative.
Building and owning a first-class logistics network is critical for the company’s success as it will ultimately help protect its market share and profits from competitors over the long-term. We also note that faster shipping accelerates sales growth, which in turn, fosters wider selection, better prices, and greater investment in logistics, all part of a virtuous cycle. As long-time MercadoLibre followers, we are more than happy for the company to make such long-term investments and continue to believe the company is in an ideal position to capitalise on the significant opportunities ahead and deliver many years of above average growth and margin expansion.”
