According to this financial institution, advertising is expected to play a fundamental role in improving MercadoLibre’s margins.
However, analysts warn that there are also factors that could alter MELI’s performance.
He Citi expects the shares of Marcos Galperín’s company, Mercado Libre, to continue their upward path during the year that has just begun. It is worth remembering that the e-commerce company closed 2023 with an increase of 85% according to data from the Bloomberg agency, so now the financial giant’s analysts predict that the firm’s shares will rise by 24% this year to US$1,900 per share.
Yes, the projection turns out, as Citi foresees, The shares of the Argentine unicorn would once again operate at values close to all-time highs which played in January 2021.
“MELI’s results continue to exceed our expectations. Not only is its core business growing above our forecasts, but the pace of margin expansion has been notable.“wrote the bank in a document dated January 2024.
Citi’s projection is validated with that of JP Morgan, which in October last year estimated that Mercado Libre’s share would have a target price of US$2,000 in December 2024.. For the New York giant, the firm’s stock would have increased by 70% at the end of the year that has just begun.
From Citi’s research area they recalled that Galperín’s company exceeded its expectations in 2023, so by 2024, “we continue to expect market share gains in the main geographies such as Brazil, Mexico and Argentina.
MercadoLibre: what could go wrong
However, analysts warn that there are also factors that could alter MELI’s performance.
The scenario could be significantly altered by three main factors:
- Firstly, there is a high probability that the increase in GMV (Gross Merchandise Volume) will slow down at a steeper pace than initially anticipated;
- Secondly, competition from Amazon and Chinese platforms such as SHEIN, Temu, TikTok Shop and AliExpress are expected to intensify their presence and actions in the Brazilian and Mexican markets.
- And finally, there is a possibility that the profit margin may stabilize or even decline due to higher investments in the platform or a rapid expansion in credit provision.
For its part, JPMorgan’s analysis highlights the potential of MercadoLibre’s emerging advertising business as one of the main drivers of the increase in its stock market value on Wall Street. In fact, according to this report, the company’s advertising proposal is largely comparable to that of Amazon, according to the US bank.
According to this financial institutionadvertising is expected to play a key role in improving MercadoLibre’s margins. This is because this segment offers the highest margins among all its business units, similar to Amazon, with a direct contribution margin of around 90% and an EBIT margin of between 75% and 80%.
Source: Ambito
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