Sarah Travers
Latin America’s MercadoLibre (MELI) -1.75% has faced a turbulent few weeks in the stock market, with its share price dropping 17% from its September high. Despite marketwide headwinds, there are compelling reasons to consider this “Amazon of Latin America” for investment.
Resilience Amid Economic Uncertainty
Latin American economies have faced formidable pandemic-related obstacles, a situation highlighted by the United Nations Economic Commission for Latin America and the Caribbean, which has projected a modest 1.7% growth rate for the region this year. Nevertheless, there is optimism on the horizon, with the World Bank and the International Monetary Fund anticipating a significant rebound.
Economic growth in South America is expected to strengthen from 2% in the current year to 2.3% by 2024, signifying a positive turn for the region. One contributing factor to this potential resurgence is South America’s relative insulation from global geopolitical conflicts, fostering a conducive environment for sustained economic growth.
Booming E-commerce Market
Latin America is currently witnessing a surge in e-commerce growth reminiscent of the early days of online shopping in the United States. Key factors contributing to this boom include enhanced broadband connectivity and increased mobile accessibility, both of which have driven the region’s e-commerce market to project a substantial 22% expansion by 2026.
In this promising landscape, MercadoLibre stands as a well-positioned player with a strong presence in countries like Brazil, Mexico, and Colombia. Furthermore, the company’s digital payments platform, Mercado Pago, is poised for substantial growth within the region’s mobile payment market, which is predicted to maintain an impressive annualized growth rate of 24.5% through 2028.
Undervalued Potential
Analysts are expressing a consistently optimistic sentiment regarding MercadoLibre’s stock, as reflected in a consensus price target of $1,620.60. This projection signifies a substantial 37% increase from the current stock price.
Impressively, even the most cautious analysts abstain from issuing a “sell” rating for the stock, with the majority of them endorsing it as a “strong buy,” underscoring the overall bullish sentiment surrounding MercadoLibre in the investment community.
Considerations for Investors
Headquartered in Uruguay, MercadoLibre primarily focuses its operations in the dynamic markets of Latin America and South America. This geographical focus can present unique challenges for investors seeking to stay informed about the company and its market dynamics. Given its regional orientation, the stock of MercadoLibre may exhibit higher levels of volatility when compared to U.S.-based businesses, making it an attractive option for investors who are comfortable with a certain degree of risk in their portfolios.
Adding International Exposure
MercadoLibre offers a unique opportunity for investors to diversify their portfolios with international exposure. In an environment fraught with political uncertainties in other regions, the company’s potential for growth in Latin America makes it an appealing option for those seeking promising investment opportunities.
In summary, MercadoLibre’s recent stock dip, driven by economic challenges in Latin America, presents an attractive buying opportunity. The company’s resilience, strong presence in the booming e-commerce market, and the endorsement of analysts make it a compelling choice for investors looking to add a touch of international diversity to their portfolios. While it may not be suited for everyone, those willing to embrace some volatility may find MercadoLibre to be a hidden gem in the current investment landscape.
