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MercadoLibre: Acquisition Target for Amazon?

Posted on Wednesday, Mar 14th 2012

According to researcher, eMarketer, business-to-consumer sales in Latin America, excluding Brazil, are projected to reach $15.2 billion by the end of the current year and will grow to $28.5 billion by 2015. Overall, analysts believe Latin America e-commerce will grow 20% annually, driven by increased Internet adoption by both consumers and marketers. Currently, less than 2% of retail products sold in the region are available online, pointing to a big opportunity for market growth. Brazil is another high-growth market with analysts estimating e-commerce sales in the country to grow more than 25% this year.

MercadoLibre’s Financials
MercadoLibre’s (NASDAQ:MELI) Q4 revenues grew 39% over the year to $86.5 million, falling short of the market’s expectations of $87.3 million. EPS of $0.47 was short of the Street’s target of $0.51 for the quarter.

Gross merchandise volume grew 47% over the year to $1.45 billion and total payment volumes grew 70% to $402.3 million. Their payment platform also continued to draw increased use, with the number of payment transactions processed growing 95% over the year. The site’s total confirmed registered users grew by 25% to 65.8 million users.

MercadoLibre ended the year with revenues growing 38% over the year to $298.9 million. Gross merchandise volume grew 42% over the year to $4.8 billion. They reported EPS of $1.73 for the year.

For the current quarter, MercadoLibre expects revenues of $83.3 million with EPS of $0.45. The market was looking for revenues of $81.6 million with EPS of $0.46. MercadoLibre expects to end the year with revenues of $397.1 million and EPS of $2.23.

MercadoLibre’s Move into Mobile
MercadoLibre is also working to attract mobile device consumers to their website. Last quarter, they launched a new mobile app. Within six weeks of its launch, the app was downloaded more than 700,000 times and contributed 0.5% of their revenues during the period. The app is available free for Android, iOS devices, and the BlackBerry.

Their stock is trading at $96.16 with a market capitalization of $4.24 billion. It touched a 52-week high of $104.50 in February 2012.

The world economy may be troubled, but the Latin American e-commerce market continues to grow strong. AT Kearney claims that Brazil is among the most attractive emerging market country for retailers, and the South American nations of Uruguay, Chile, and Peru feature in the top 10 emerging markets. In 2010, retail sales in Brazil grew 11%, even more than their GDP growth rate. There is enough market opportunity for MercadoLibre’s growth. They will, however, need to watch out for competition from bigger players. Analysts believe that the leader of online retailing, Amazon, may be eyeing expansion in Latin America. If they do, MercadoLibre is clearly one of the best acquisition targets.

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