MercadoLibre Stock Analysis - Amazon of Latin America
MercadoLibre $MELI is known as the Amazon $AMZN of Latin America but it is really the Alibaba $BABA of LATAM.
Amazon is like an online supermarket holding inventory that they would later sell. This is the same business model of JD.com but MercadoLibre or even Alibaba and eBay are only marketplaces, which connect buyers to sellers. That's why we cannot call Mercado Libre the Amazon of Latin America. Being a marketplace allows for higher margins.
MercadoLibre is trying to be more than just an ecommerce business. Only about half of revenues come from their retail business. Mercado Pago is known as the PayPal of Latin America. They also have a credit business, they offer warehousing facilities to their sellers.
In the short term, this move to new businesses is affecting their profits. They are spending much on sales and marketing and they can no longer afford to pay a dividend.
MercadoLibre operates in 18 countries with their largest markets being Brazil, Argentina and Mexico.
MercadoLibre stock vastly outperformed Amazon in the last 12 years. If you had invested $10 000 in MELI in 2008, you would have $1.4 million today. We cannot expect the same thing to happen now since the valuations on the stock are pretty high.
Nevertheless, it is an interesting company to look at. What we aim to do is find the next MercadoLibre. They should have the following characteristics:
1. Proven Business model and profitable
2. Small but fast expanding market
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