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Mercadolibre Inc (NASDAQ:MELI), an Argentinian e-commerce company with exposure to multiple Latin America countries including Brazil, faces a negative near-term catalyst that prompted Stifel to downgrade the stock.
The Analyst
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Stifel's Scott Devitt downgraded MercadoLibre's stock rating from Buy to Hold with a price target lowered from $425 to $405.
The Thesis
Brazil's national postal service Correios was originally scheduled to increase its shipping fees March 6, Devitt said in the downgrade note. While a March 5 injunction blocked the increase, it was lifted March 13 and the price increase became official March 14. Correios boosted its prices by 8 percent or more for local and state level deliveries and by 30 to 50 percent or more for packages shipped on national routes, according to Stifel.
The price increase is likely to result in a 30-percent blended increase to MercadoLibre's costs, as half of its entire gross merchandise volume in Brazil goes through local and state channels, and the other half goes through national routes, the analyst said. The dollar cost for the company, assuming the higher delivery fees remain in place through the end of 2018, will be $53 million, Devitt said. As a result, the analyst's 2018 adjusted EBITDA estimate falls from $199 million to $145 million.
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The price increase also creates a "higher level" of uncertainty in the nea-to-immediate term, but the company's management will likely be able to navigate the higher shipping cost tailwind in the long run, Devitt said.
Price Action
Shares of MercadoLibre were down 2.35 percent after the open Thursday.
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The Correios post office in Sao Paulo. Photo by The Photographer/Wikimedia.
Crypto Whales Are Loading Up — Are You?
New research shows the biggest crypto buyers are back. And this time? They could hold for the possibility that Bitcoin will surpass $100,000 in 2024. You don’t want to miss the next massive crypto bull run like we saw in 2020 and 2021. To know exactly what’s going on and what to buy… Get Access To Benzinga’s Best Crypto Research and Investments For Only $1.