MercadoLibre stock tumbled Friday on a mixed fourth quarter earnings report. Revenue for the Latin American e-commerce company surged 42% to top expectations but a pair of one-off tax hits took a bite out of profits.
MercadoLibre reported late Thursday said that it earned an adjusted $3.25 per share on sales of $4.3 billion for the December quarter. On average, analysts projected the Uruguay-headquartered company would post adjusted earnings of $7.10 per share on sales of $4.1 billion, according to FactSet.
MercadoLibre's net income was $165 million for the quarter, compared with expectations for $361 million, according to FactSet. The company said its profit was dinged by a pair of one-off tax expenses in Brazil. Excluding those costs, the company said, net income was $383 million.
For the same period a year earlier, MercadoLibre posted adjusted earnings of $3.25 per share on sales of $3 billion.
On the stock market today, MercadoLibre stock fell 10.4% to close at 1,629.32.
MercadoLibre Stock: Fintech, E-Commerce Business Grows
Often called the Amazon.com of Latin America, MercadoLibre operates an e-commerce platform across 18 countries, with Brazil, Mexico and Argentina its largest markets. But the company also offers payments and a Venmo-like digital wallet throughout the region.
The total volume of payments handled by MercadoLibre's fintech arm climbed 57% to $56.5 billion for the December quarter. The gross merchandise volume sold through its e-commerce marketplace climbed 40% year over year to $13.5 billion.
On its earnings call Thursday night, MercadoLibre management highlighted the e-commerce firm's broader growth.
Over the past six years, Chief Financial Officer Martin de los Santos told analysts, "We multiplied our revenues by 10x while achieving significant improvements in profitability, culminating in nearly $2 billion of operating income in 2023."
Following the report, Wedbush Securities analyst Scott Devitt reiterated a positive outperform rating for MercadoLibre and upped his price target for MELI stock to 2000, from 1800. Devitt wrote to clients that MercadoLibre is "executing across e-commerce and financial services."
Still, Devitt noted that MercadoLibre's operating income of $572 million (excluding one-time expenses) was still short of consensus expectations for $669 million. But he said the company has steadily improved its margins while accelerating sales growth.
Devitt expects further margin improvements as MercadoLibre sells more advertising on its app and delivers more orders on its website.
"Over time, we continue to see a clear path to higher take rate and profit margin driven by rising fulfillment adoption, advertising growth, and scale," Devitt wrote.
MELI Stock Technical Ratings
Strong sales and earnings growth has powered MercadoLibre stock to big gains in recent quarters. Shares were ahead 18% on the year heading into the report and up 61% in the past 12 months.
But with Friday's slide, MELI stock had sunk below its 21-day and 50-day moving averages, according to IBD MarketSmith.
Coming into the earnings report, MercadoLibre stock had a perfect IBD Composite Rating of 99, according to IBD Stock Checkup. The score combines five separate proprietary ratings into one rating. The best stocks score above 90
Further, MercadoLibre's IBD Relative Strength Rating was 90 out of 99. The rating compares a stock's price movement over the last 52 weeks with that of others in IBD's database.
