Market Overview

Citi Upgrades Mercadolibre As Shares Soar Following Q2 Earnings

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Mercadolibre Inc (NASDAQ: MELI) shares are soaring after reporting a second-quarter earnings beat.

MercadoLibre reported quarterly earnings of 31 cents per share, which beat the analyst consensus estimate of 25 cents. The company reported quarterly sales of $545.242 million, which beat the analyst consensus estimate of $504.16 million.

The Analyst

Citi analyst Tobias Stingelin upgraded Mercadolibre from Neutral to Buy and raised his price target from $609 to $729.

The Thesis

Stingelin said Mercadolibre's results were solid despite missing his EBITDA estimates by 67%, but ensured it only represents $10 million and that growth remains stellar.

The analyst said top-line growth of 63% year-over-year indicated the company’s strategy to acquire customers and increase frequency of usage, continues to yield results.

Stingelin says solid growth has come at a cost, which was evident in the 49% year-over-year increase in sales and marketing expenses, as the company continues to invest in fintech services and in marketing.

“Despite the EBITDA miss, reported earnings exceeded our estimates on the back of an income tax credit related to tax loss carry forwards,” Stingelin wrote in a note.

Citi is increasing its revenue growth estimates for 2019 and 2020, but reducing its margin estimates to reflect higher investments to drive growth. The firm cut its earnings estimates by 5% in 2019 and 12% in 2020.

Price Action

Mercadolibre shares traded higher by 11.7% at $685.80 Thursday afternoon.

Related Links:

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

MercadoLibre's Valuation Is Too Compelling To Pass Up, KeyBanc Says In Upgrade

Latest Ratings for MELI

DateFirmActionFromTo
Jan 2020MaintainsOverweight
Jan 2020ReinstatesOverweight
Dec 2019UpgradesUnderperformMarket Perform

View More Analyst Ratings for MELI
View the Latest Analyst Ratings

Posted-In: Citi Tobias StingelinAnalyst Color Earnings News Upgrades Price Target Analyst Ratings

 

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