Last week, one of our old stocks Mercadolibre (MELI) was upgraded. I eagerly went to see the reasoning behind it. And our 1999 reasoning was here "it's one of the top 5 stories out there in internet land!" (hey I happen to agree with that idea, but that does not mean you should slap any valuation on it). The real reasoning said analyst should have used is "it's cheaper than Baidu! (BIDU)" Then when MELI passed BIDU in valuation the BIDU analysts can come out and upgrade Baidu with reasoning "it's cheaper than MELI". And so and so the two bands of analysts can go at each other, ever increasing valuation on "it's cheaper than the other guy and a top franchise to boot!" as Greenspan morphs into Bernanke, and we repeat the same reindeer games. Heck we don't have to even wait a generation or 2 anymore to revisit old lessons forgotten. Thanks Bubble Makers in Chief.
The only difference (thus far) is in 1999, the stock price would have jumped from $50 to $70 in the opening 15 minutes of the session it was upgraded. And then the next analyst could have come out with his $90 target within days. This means we are not yet at Code Red status of bubble making... still in Orange.
- Thomas Weisel Partners analyst Jordan Rohan has launched coverage of Latin American e-commerce play MercadoLibre (MELI) with an Overweight rating and $70 price target. The stock closed yesterday at $50.14.
- “We believe MELI is one of the top-five secular growth stories on the Internet due to the growth in users, usage and monetization,” he writes in a research note. “While valuation appears high today, (translation: "don't worry about it, we'll come up with a new valuation method" or "cheaper than Baidu!") we forecast upside to near-term estimates and strategically the Pago payments platform distances MercadoLibre from competition.”
- Rohan expects MELI to post profits of $1.14 this year.
No position other than deja vu