Thursday, August 5, 2010

Mercadolibre (MELI) Shakes Off Negative Earnings Reaction

The nearly completely random reactions to earning reports continues...

Last night Mercadolibre (MELI) posted decent numbers, beating analysts estimates on EPS by 2 cents and on revenue by a whisker.  I thought the stock would get hammered as I've had other companies do much better and lose 8-15% instantly this earnings period.   And those companies had much lower valuations than MELI's 60x forward.   Instead it was only down 4-5% in after hours.  This morning, it was initially weaker and fell to the 50 day moving average before bouncing strongly and now is nearing flat on the day.  I missed the move down to add to the position, however looking at the chart I wish it had come down to just below $56 to "fill the gap" from early July and then bounced.

Either way it seems to have survived the lemmings, and now we have one less issue to worry about for the next 90 days. (full report here)  Much like EBAY, their version of "Paypal" continues to be the jewel of the portfolio, with huge growth metrics.  (it is now up to almost 1/3rd of total revenues)

  • For the quarter, the Latin American e-commerce company posted revenue of $52.5 million and profits of 26 cents a share, edging the Street at $52.1 million and 24 cents.
  • MercadoLibre reported consolidated net revenues for the three months ended June 30, 2010 of $52.5 million, representing 28.4% year-over-year growth in U.S. dollars and 38.5% year-over-year growth in local currencies
  • In local currencies, Marketplace revenue grew 37.3% year-over-year while Payments revenue grew 42.5% year-over-year. In U.S. dollars, Marketplace revenue grew 19.9% to $37.2 million in the second quarter of 2010 from $31.0 million in the second quarter of 2009. 
  • In U.S. dollars, Payments revenue grew 54.9% to $15.3 million from $9.9 million in the prior year period.
  • Items sold on MercadoLibre grew 33.7% to 9.2 million while total Payments transactions going through MercadoPago grew 91.2% to 1.3 million when compared to the second quarter of 2009.
  • The second quarter 2010 gross profit margin was 78.3% compared to 79.0% for the second quarter of 2009. The slight decrease in gross profit margin was the result of higher growth in our lower margin Payments business, which grew to 29.2% of net revenues in the second quarter of 2010 from 24.2% in the prior year period.

Long Mercadolibre in fund; no personal position

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