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MercadoLibre (MELI) stock price analysis ahead of Q1 earnings

By: Invezz

MercadoLibre (NASDAQ: MELI) stock price will be in the spotlight on Thursday as investors focus on the company’s financial results. It has risen to a high of $1,485 from a low of $1,325, its lowest point since November last year. It remains in a bear market as it retreated by over 20% from its highest point in 2023.

MercadoLibre earnings ahead

MercadoLibre, the leading e-commerce and fintech company in Latin America, has been one of the fastest-growing firm in the industry. The company’s annual revenue has soared from $2.2 billion in 2019 to over $14.4 billion. 

Analysts believe that the company’s financial results will continue growing in the coming years. Its annual revenue is expected to move to over $17.46 billion this year and to over $21 billion in 2025.

Analysts expect that MercadoLibre’s revenue for the quarter will come in at $3.85 billion, a 34% increase from the same period in 2023. The company’s guidance for the second quarter is expected to come in at $4.15 billion.

The company has achieved this success by having a popular marketplace where people buy products in all industries. As a result, its Gross Merchandise Value (GMV) has been in a strong uptrend. It jumped by over 79% in the fourth quarter of 2023 to over $13.5 billion.

MercadoLibre is also doing well because of its all-inclusive business model. In addition to offering a marketplace, it also provides logistics, fintech, and credit business. Its logistics business facilitated deliveries of 121.6 million parcels, up from 100.4 million in Q4’22. 

Therefore, while MercadoLibre faces substantial competition, its strong ecosystem has helped it to maintain a strong market share in the region. At the same time, the firm has moved into profitability. It moved from a net loss of $172 million in 2019 to a net profit of over $987 million in 2023.

The biggest concern among investors is MercadoLibre’s valuation, which is substantial since the company has a market cap of over $72 billion. It has a trailing and forward PE multiple of 73 and 42, which is huge. As such, this means that the company is priced to perfection, meaning that it needs to publish strong results.

The other risk is that Latin America is going through substantial currency movements. The Argentinian peso has continued to plunge while the Brazilian real has fallen by over 10% from its highest point in 2023. Also, the Mexican peso has fallen by over 5% from its highest level this year.

MercadoLibre stock price forecastMercadoLibre stock

MELI chart by TradingView

Turning to the daily chart, we see that the MELI share price has been in a strong bearish trend after peaking at $1,822, its highest point in February this year. It dropped to the crucial support at $1,325, coinciding with the ascending trendline that connected its lowest swings since June 2022.

MercadoLibre stock has formed an ascending channel shown in red. It has now moved to the 200-day Exponential Moving Average (EMA). Therefore, at this stage, the outlook for the stock ahead of earnings is neutral, with the key support and resistance points to watch being at $1,400 and $1,550.

The post MercadoLibre (MELI) stock price analysis ahead of Q1 earnings appeared first on Invezz

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