MercadoLibre (NASDAQ:MELI), often pitched as a Latin American version of Amazon (NASDAQ:AMZN) or China’s Alibaba (NYSE:BABA), rose sharply on good results and guidance. MELI stock is up 17% so far this morning.
The company said it earned $123 million, or $2.43 per share, on revenue of almost $2.6 billion during the quarter. Its largest operation is in Brazil, but it operates in 18 countries with financial and advertising services as well as online sales.
Shares rose 12.5% overnight and were due to open at $1,000 each, a market cap of nearly $45 billion. The increase is largely making up for a dip that resulted from a bad first quarter.
Payments Were in the Earnings Spotlight
While Amazon and Alibaba are centered on commerce, MercadoLibre’s numbers are dominated by payments. It handled over $30 billion in payments during the quarter, up 72% from a year ago. Gross merchandise sales rose 21% to $265 million. Revenue growth was fastest in Mexico when measured in U.S. dollars.
In addition to providing payments, MercadoLibre also provides credit to both consumers and merchants. It closed the quarter with $2.7 billion in loans, over half of them consumer loans.
TipRanks rates MELI stock a “strong buy,” with 12 of 13 analysts telling clients to buy it. The price target is about $1,300. The stock’s value is down by one-third in 2022, however, after a code breach, a ransomware attack and continuing problems with counterfeiting and piracy. The stock price also fell sharply after first-quarter results disappointed.
What Happens Next for MELI Stock?
It’s a mistake for investors to compare MercadoLibre directly with Amazon, Alibaba or even Jumia Technologies (NYSE:JMIA), sometimes called the “Amazon of Africa.” Mercado Libre is closer in style to Alibaba, but even more focused on payments — a sort of Paypal (NASDAQ:PYPL) for Latin America.
This means the risk profile is different. In MercadoLibre’s case, much of the risk comes from its loans, many of which don’t “perform” in currency risks and inflation. Making money work in a multi-currency environment will be a continuing challenge. But if the company can manage it, it’s a buy.
On the date of publication, Dana Blankenhorn held long positions in AMZN and BABA. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.