Why did MercadoLibre shares fall more than 10% in one day?

Why did MercadoLibre shares fall more than 10% in one day?

MercadoLibre presented its quarterly results with record numbers. However, the market reacted very negatively. How is it explained? The company reported a notable increase in its sales, totaling US$4.3 billionwhich represented a historical record.

The e-commerce sector grew by 91% and the Fintech sector rose by 73%. In addition, the growth in unique active users was significant, reaching 218 million at the end of 2023. Finally, the Total Payment Volume (TPV) grew 57%.

How did the market react? Let’s look at the graph:

Shares suffered a fall of 10.4% this Friday, after having presented their results. So, why did stocks fall sharply if the balance was a record?

One interpretation could be that the market did not like the earnings the company reported.

MercadoLibre’s profit was impacted by two extraordinary tax charges in Brazil, which represented approximately US$350 million. These charges were related to tax obligations from previous periods.

One of the extraordinary expenses amounted to approximately US$30 million and was due to a sales tax in that country. The second expense reached US$320 million and arose from a dispute with the Federal Revenue Secretariat of Brazil since 2014.

It is worth noting that both expenses are not recurring. If they were not taken into account, the net profit would have been US$383 million, instead of the US$165 million it reported.

Let’s look at the evolution of its sales and profits in recent years:


The growth in sales is spectacular, at an astonishing rate. Profits, for their part, had also been growing in recent quarters. And taking out the impact of the two extraordinary expenses, it would also have continued on that upward path.

The big question is whether this sharp fall in MercadoLibre shares is reasonable or exaggerated. The reality is that it is very difficult to know. Therefore, the ideal is to follow what prices do.

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Note: The material contained in this note should NOT be interpreted under any circumstances as investment advice or a recommendation to buy or sell a particular asset. This content is for educational purposes only and represents the opinion of the author only. In all cases it is advisable to seek advice from a professional before investing.

Source: Ambito

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