We recently published a list of 10 Best Cash App Stocks To Buy According to Hedge Funds. In this article, we are going to take a look at where MercadoLibre, Inc. (NASDAQ:MELI) stands against other best cash app stocks to buy according to hedge funds.
The mobile payment service Cash App has grown significantly throughout the years, and in 2022 it was valued at $138 billion, up from $40 billion in 2020. Although its earnings increased to $2.95 billion, showing consistent yearly growth since 2018, its revenue decreased to $10.6 billion in 2022 from $12.3 billion in 2021, despite this remarkable valuation. Cash App’s user base grew by 7 million from 2021 to 51 million in 2022, due to its user-friendly interface and array of financial services, which include peer-to-peer payments, Bitcoin investments, and cash card features. The four U.S. states of Texas, California, Florida, and New York together account for 48.75% of Cash App’s user base, with over half of its customers concentrated in these states. As of 2020, there were just 10,000 active Android users in the United Kingdom, and its market share was less than 0.05%. In 2022, the platform handled more than 528 million transactions, demonstrating its increasing use. Cash App is positioned as a major participant in the digital payment ecosystem, particularly in the U.S. market, due to its excellent features and rising profitability.
As per findings by Apptopia, Cash App was the most downloaded payment app between April and May 2020, with a 20.1% increase in U.S. downloads, reaching around 4 million within that time frame. Additionally, usage increased, with roughly 250 million sessions in April—the second-highest number among payment applications. As people looked for alternatives to in-person banking and provided financial support to friends and family, the pandemic caused a shift toward digital transactions, which is what is responsible for this surge.
According to Block, Cash App’s parent company, in a manner that many financial institutions have not been able to, Cash App has expanded access to the financial system and enabled a wide range of consumers to send, spend, save, invest, and comprehend their money more effectively. Its goal is to “redefine the world’s relationship with money by making it more relatable, instantly available, and universally accessible,” which is in line with this. Block believes Cash App can keep improving the economy both today and in the future.
However, Cash App has also faced challenges. Recently, under Jack Dorsey’s leadership, Block agreed to a $175 million settlement with the CFPB, which included a $55 million fine and up to $120 million in reimbursements for Cash App users. Allegations of widespread fraud and insufficient customer service on the platform were addressed in the settlement. The CFPB charged Cash App with facilitating fraud, sending users to banks, and neglecting to look into questionable transactions. Cash App accounted for over half of Block’s 2023 gross profit, with over 56 million accounts. In addition, after 48 state regulators joined together, Block paid an $80 million fine for money laundering violations.
The press release stated:
“While we strongly disagree with the CFPB’s mischaracterizations, we made the decision to settle this matter in the interest of putting it behind us and focusing on what’s best for our customers and our business,”
Methodology
For this article, we reviewed multiple reliable websites and videos that discuss stocks available on Cash App. From there, we formed an initial list of the 20 Best Cash App Stocks To Buy According to Hedge Funds. From the resultant dataset, we chose 10 stocks with the highest number of hedge fund investors, using Insider Monkey’s database of 900 hedge funds in Q3 2024 to gauge hedge fund sentiment for stocks.
Why are we interested in the stocks that hedge funds pile into? The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 275% since May 2014, beating its benchmark by 150 percentage points. (see more details here)
A customer using their phone to access an online commerce platform.
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.”
Overall, MELI ranks 5th on our list of best cash app stocks to buy according to hedge funds. While we acknowledge the potential for MELI to grow, our conviction lies in the belief that some AI stocks hold greater promise for delivering higher returns and doing so within a shorter time frame. If you are looking for an AI stock that is more promising than MELI but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
READ NEXT: 20 Best AI Stocks To Buy Now and Complete List of 59 AI Companies Under $2 Billion in Market Cap
Disclosure: None. This article is originally published at Insider Monkey.
