5. MercadoLibre, Inc. (NASDAQ:MELI)
Number of Hedge Fund Holders: 84
MercadoLibre, Inc. (NASDAQ:MELI) is a prominent online marketplace founded in Argentina and headquartered in Uruguay. The company was founded in 1999 with the vision of becoming the largest e-commerce company in Latin America. Today, MercadoLibre, Inc. (NASDAQ:MELI) is present in 18 countries and has over 65 million buyers and 12 million sellers.
Consumers on MercadoLibre can shop for consumer electronics, automotive accessories, and home appliances. Merchants on the other hand can create a single account to sell to multiple markets. MercadoLibre, Inc. (NASDAQ:MELI) is one of the largest e-commerce companies in Latin America and reported gross merchandise value worth $45 billion in 2023. The company has grown its revenue at a compound annual growth rate of 28% between 2016 and 2023.
The company’s strong e-commerce network is its economic moat. In 2023, MercadoLibre delivered 1.38 billion items, and 76% of them were delivered within 48 hours in the last quarter of 2023. Between 2019 and 2023, the company increased buyer engagement by 468%. The average number of items purchased per person on its platform grew to 7.1 by the end of 2023 from 4.4 in 2019.
Overall, the company’s share price has grown at a compound annual growth rate of 33% over the past 10 years. The company expects e-commerce penetration to rise in major markets including Latin America, China, the United States, and the United Kingdom.
Analysts are bullish on MELI and their 12-month median price target of $2,112 points to a 5% upside from current levels. Overall, MELI was held by 84 hedge funds at the close of Q2 2024 with total stakes amounting to $4.63 billion. As of June 30, Generation Investment Management was the largest shareholder with a position worth $822 million.
MELI is currently trading at 56 times this year’s earnings estimate, higher than the sector’s forward P/E of 15. While there’s a premium here, the company’s growth trajectory cannot be ignored. Analysts expect earnings to grow 83% this year to $36 per share, and by 141% to $47 per share in 2025, from 2023.
Lakehouse Capital stated the following regarding MercadoLibre, Inc. (NASDAQ:MELI) in its May 2024 investor letter:
“The Fund’s largest position, Buenos Aires based e-commerce leader MercadoLibre, Inc. (NASDAQ:MELI), reported a robust result that once again came in ahead of analyst expectations. Net revenue grew 30% year-on-year in U.S. dollar terms to US$4.0 billion while operating margins came in at 12.0%, providing a healthy balance of growth and profitability. Its marketplace business proved resilient, with strength in Brazil and Mexico more than enough to offset weakness in Argentina, which contacted by roughly a third due to weak macroeconomic conditions exacerbated by the 50%-plus devaluation of the Argentine Peso in December 2023. Whilst the economic situation in Argentia remains severe, we are comfortable with the risk as not only has management proved very adept at handling the challenges to date, but post the devaluation, the risk is meaningfully reduced as Argentina now only contributes 13% of the company’s total operating income. Overall, gross merchandise value still grew at 20% year-on-year to $11.4 billion and we continue to see significant opportunities ahead given the relatively nascent penetration of e-commerce in the region.”
