BTIG Drops Bullish MercadoLibre Stance, Says Payments Stock Has Limited Upside After Rally

Following a 94-percent year-to-date gain, shares of MercadoLibre Inc MELI seem appropriately valued, with balanced risk-reward, according to BTIG.

The Analyst

Marvin Fong downgraded MercadoLibre from Buy to Neutral. 

The Thesis

While the fintech business seemed hugely underappreciated when BTIG initiated coverage of MercadoLibre in November 2018, investors now seem to be “appropriately focused on that segment,” Fong said in the Tuesday downgrade note. (See his track record here.) 

"We believe now is a good time to step back and see if the highly dynamic LatAm fintech landscape plays out in a way that is consistent with what shares are discounting," the analyst said. 

Brazil’s economy performing worse than expected does not bode well for the company’s e-commerce business, Fong said. While GDP contracted 0.2 percent in the first quarter, the official forecast for 2019 has been revised down from a projection of 2.2-percent growth to 1.6-percent growth, he said. 

“MELI’s GMV is far larger than it was in 2014-2016 and is more closely tracking the broader space than it was in the last recession when its strong momentum enabled it to power through macro weakness,” Fong said.

The analyst also expressed concern around the growing presence of Amazon.com, Inc. AMZN in Brazil.

Price Action

MercadoLibre shares were down 3.69 percent at $547.81 at the time of publication Tuesday. 

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