MercadoLibre stock gains new Street-high targets Author: Investing.com

MercadoLibre The company’s (NASDAQ:) shares have regained Wall Street’s confidence, with firms like Morgan Stanley and Bank of America raising their price targets to new highs on the street.

Analysts at Morgan Stanley noted that the company’s shares are currently trading near their all-time highs, but they predict further growth driven by four key factors related to gross merchandise value (GMV), advertising, credit and Argentina.

The bank raised its target price on the stock from $2,175 to $2,500, implying an upside of more than 18% from current levels.

MELI shares rose more than 1% in pre-market trading on Friday.

The investment firm highlighted MercadoLibre’s GMV growth, especially in Brazil, where the company grew by 33% in the first half of 2024, outperforming competitors such as Magazine Luiza and Casas Bahia.

These results are attributed to MercadoLibre’s investments in logistics, financial technology and platform enhancement, which are considered key factors driving the growth of digital commerce in Latin America.

Forecasts suggest that industry growth rates in Brazil and Mexico could be similar to MercadoLibre’s GMV growth rates, which could indicate a cautious slowdown in share price growth, especially in Brazil.

The company also sees a runway for growth for Mercado Ads, MercadoLibre’s advertising arm. With ad revenue making up a small portion of consolidated GMV last year, there’s significant room for expansion. The partnership with Disney, in which MercadoLibre will serve ads on Disney+, is seen as a positive development.

MercadoLibre’s credit portfolio, Mercado Credito, is another area of ​​expansion, with new products and entry into new markets such as Mexico.

Despite a slowdown in growth in 2023, the portfolio rebounded in the first half of 2024. The company’s ambitions in Mexico, including applying for a banking license and securing additional financing, point to a broader vision that could lead to it playing a more important role in digital banking in the region.

Finally, in Argentina, despite economic challenges, MercadoLibre managed to return to growth in merchandise sales faster than initially anticipated.
The country still generates a significant portion of the company’s earnings before interest and tax (EBIT).

While comparative fundamentals are challenging for the second half of the year, the company continues to believe that the underlying estimates for Argentina are safe given the potential positive impact of macroeconomic or exchange rate normalization on MercadoLibre’s business in the country.

Analysts at Bank of America also independently raised their price target on MELI shares from $2,250 to $2,500 “to reflect GMV and credit utilization.”

“We suggest there is significant buying power in advertising, logistics, lending and portfolio financing that could boost earnings,” the analysts noted.