MercadoLibre stock outlook dims as JPMorgan adjusts estimates for Brazil challenges

EditorEmilio Ghigini
Published 2025/01/08, 09:08
© Reuters

On Wednesday, JPMorgan revised the price target for MercadoLibre (NASDAQ:MELI) stock, traded on NASDAQ:MELI, from the previous $2,150.00 to a new target of $1,950.00. Despite the adjustment, the firm maintained its Neutral stance on the e-commerce giant's stock, which currently commands a market capitalization of $89.8 billion. According to InvestingPro analysis, the company maintains a "GREAT" overall financial health score of 3.34 out of 5.

The revision of MercadoLibre's price target by JPMorgan stems from several factors influencing the company's financial forecasts. The analyst noted that the lower foreign exchange (FX) expectations, particularly in Brazil, played a significant role in the reassessment.

Despite these concerns, MercadoLibre has demonstrated strong operational performance with impressive revenue growth of 35% over the last twelve months and maintains a robust gross profit margin of 52.46%. Additionally, the impact of an aggressive Black Friday campaign in Brazil was taken into account.

Higher costs of capital were also cited as a contributing factor to the revised outlook. These elements have led JPMorgan to reduce its estimates for MercadoLibre's earnings before interest and taxes (EBIT) for the years 2025 and 2026 by 9% and 4%, respectively. Similarly, the firm's projections for MercadoLibre's earnings for the same periods were adjusted down by 8% and 3%.

The new price target of $1,950.00 represents a modest 8% potential upside from the current levels, according to JPMorgan's assessment. The firm also indicated that its expectations for MercadoLibre's 2025 and 2026 metrics remain below the consensus.

In the context of the broader technology sector, JPMorgan highlighted a preference for other tech stocks, specifically mentioning those with an Overweight rating, such as VTEX and Intelbras, over MercadoLibre. The analyst's comments suggest a cautious outlook for MercadoLibre in comparison to selected peers within the industry.

In other recent news, MercadoLibre reported a net income of $397 million. The company demonstrated significant growth in its e-commerce and fintech sectors in the third quarter of 2024, with revenue rising by 35% year-on-year. Despite margin pressures due to credit expansion, the company remains optimistic about its credit quality and long-term growth.

MercadoLibre experienced a 34% Gross Merchandise Volume increase in Brazil and 27% in Mexico, and sold over 60 million items in Argentina. Additionally, six new fulfillment centers were opened, enhancing logistics and fulfillment penetration by 4.5 percentage points. The fintech segment saw the issuance of 1.5 million new credit cards and a 166% increase in credit card TPV.

These are recent developments that also include the company's plans to double its fulfillment centers in Brazil by the end of 2025. Despite initial costs from new fulfillment centers and upfront provisioning for credit expansion affecting margins, MercadoLibre anticipates long-term gains. The company's investments in fulfillment are expected to enhance GMV through faster deliveries and improved customer satisfaction.

This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.

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