Thursday, March 6, 2008

Bookkeeping: Cutting Mercadolibre (MELI) in Half on Nice Earnings


Mercadolibre (MELI), a South American e-commerce play I like for the long run (but expect to be bought out within the next year or two), had earnings out last night, and they were solid. This is a very young company, and my error was buying a bit too early into the teeth of a market that has punished even the quality large cap tech names by 40% in 2 months.... so I have some losses in the name but continue to like it for the long run, and expect a nice premium buyout some day down the road. But for today, it is up 7% in a down market, so I am cutting my position by half, selling right near $40. This takes my stake down to 0.7% of fund.

I think most of today's action is short squeezing as the numbers were not "world beating" versus analysts expectations (but still tremendous growth year over year). This is a pricey stock; always has been - always will be; again scarcity value (name me another Latin American e-commerce stock), and in my opinion, a buyout candidate. I'd like to see it back around $32-$33 where I'd add back the shares I just sold off (and probably more).
  • MercadoLibre (MELI) shares are moving higher this morning after reporting first quarter results that were slightly better than expected.
  • For the quarter, the Latin American online commerce site reported revenue of $26.9 million, and EPS of 22 cents; American Technology Research analyst Tim Boyd says the number was 11 cents after normalizing the tax rate and adjusting for currency gains. That compared with his estimate of $26.5 million and 10 cents. Boyd notes this morning that operating margins were up 80 basis points sequentially.

Long Mercadolibre in fund; no personal position

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