61% GROWTH ALERT
#Ecommerce is GROWING by 20% in 2020 in this REGION of 635m inhabitants
Overall #Ecommerce sales will reach $ 116B by 2023 Coming from $ 70B in 2019
Here is a company that has many DETRACTORS But is HARD to IGNORE
Here is an EASY thread
#Ecommerce is GROWING by 20% in 2020 in this REGION of 635m inhabitants
Overall #Ecommerce sales will reach $ 116B by 2023 Coming from $ 70B in 2019
Here is a company that has many DETRACTORS But is HARD to IGNORE
Here is an EASY thread
$MELI Mercado Libre was founded in 1999 by Marcos Galperin (current CEO)
It operates an online marketplace and auctions in 18 countries in LATAM
$MELI also offers shipping solutions for marketplace users, digital payments and advertising solutions
It operates an online marketplace and auctions in 18 countries in LATAM
$MELI also offers shipping solutions for marketplace users, digital payments and advertising solutions
Looking good? Well there is much more
Mercado Libre - Marketplace
Mercado Shops - Online storefronts / website builder for sellers
Mercado Libre Publicidad - Advertising
Mercado Classificados - Real Estate and automotive
Mercado Libre - Marketplace
Mercado Shops - Online storefronts / website builder for sellers
Mercado Libre Publicidad - Advertising
Mercado Classificados - Real Estate and automotive
Mercado Envios - Logistics
Mercado Pago - Payments
Mercado Credito - Credits
Mercado Pago - Payments
Mercado Credito - Credits
Mercado Libre - Marketplace
Sellers pay commissions on their sales $MELI’s income us thus a percentage of the Gross Merchandise Volume (GMV)
The 52m users (45% growth YoY) can buy whatever they want Washing machines phones food chairs books sport
Sellers pay commissions on their sales $MELI’s income us thus a percentage of the Gross Merchandise Volume (GMV)
The 52m users (45% growth YoY) can buy whatever they want Washing machines phones food chairs books sport
Items sold reached 179m - growing 101% YoY All of this is supplied by the more than 11m sellers
GMV reached $ 5B during Q2 ’20 An increase of 102% on FX neutral basis (49% in USD terms)
GMV reached $ 5B during Q2 ’20 An increase of 102% on FX neutral basis (49% in USD terms)
Sounds like huge numbers Well, there are two sides of the same coin
Users (45% users growth) are buying more items that are more expensive resulting in 102% GMV growth - In LOCAL CURRENCY
When translated to USD dollars the YoY GMV growth shrinks to 49%
Users (45% users growth) are buying more items that are more expensive resulting in 102% GMV growth - In LOCAL CURRENCY
When translated to USD dollars the YoY GMV growth shrinks to 49%
This ie because LATAM currencies (Arg. Peso, Br Real) are weakening versus the USD
On 16th of Sept 2019, 1 Brazilian Real got you 0.25 USD Today you get 0.19 USD (coming from a low of 0.17)
On 16th of Sept 2019, 1 Argentine Peso got you 0.25 USD Today you get 0.013 USD (and keeps weakening)
On 16th of Sept 2019, 1 Argentine Peso got you 0.25 USD Today you get 0.013 USD (and keeps weakening)
On 16th of Sept 2019, 1 Mexican Peso got you 0.51 USD Today you get 0.047 USD (coming from a low of 0.040)
More on the FX and political risk at the end of this thread
More on the FX and political risk at the end of this thread
How does $MELI compares to competition Let’s look at key regions
Numbers are in million visits / month
$MELI 260 > Americanas 116 > OLX 106
$MELI 30 > Fravega 7.8 > OLX 3
$MELI 117 > $AMZN 52 > Coppel 25
$MELI 44 > Falabella 9.6 > OLX 6.8
Numbers are in million visits / month
$MELI 260 > Americanas 116 > OLX 106
$MELI 30 > Fravega 7.8 > OLX 3
$MELI 117 > $AMZN 52 > Coppel 25
$MELI 44 > Falabella 9.6 > OLX 6.8
$MELI leads ALL OF LATAM Let’s have a look at the TAM
#Ecommerce in LATAM is set to reach $116B by 2023 Coming from $ 70b in 2019
The COVID pandemic brought 11m new users online Totalling 192m digital buyers (around 34% of full potential)
#Ecommerce in LATAM is set to reach $116B by 2023 Coming from $ 70b in 2019
The COVID pandemic brought 11m new users online Totalling 192m digital buyers (around 34% of full potential)
Small share of online buyers and low internet penetration represent a huge opportunity
In LATAM #Ecommerce retail sales as percentage of total sales stands at 4.7% in 2020
For comparison, this number stands at 16.1% the USA and Europe (coming from 12% pre-COVID)
In LATAM #Ecommerce retail sales as percentage of total sales stands at 4.7% in 2020
For comparison, this number stands at 16.1% the USA and Europe (coming from 12% pre-COVID)
Internet penetration stands at 59% in 2020 coming from 45% in 2015
For comparison, this number stands at 90% the USA and Europe
Leaving plenty of room for growth
For comparison, this number stands at 90% the USA and Europe
Leaving plenty of room for growth
So here we have “THE” #Ecommerce leader of LATAM
The only problem identified so far is the currency risk
In the background of course, we can hear some chatter about the weak infrastructure and payment systems in LATAM
The only problem identified so far is the currency risk
In the background of course, we can hear some chatter about the weak infrastructure and payment systems in LATAM
When confronted to a roadblock leaders innovate and laggards complain
Through acquisitions, partnerships and in-house initiatives $MELI has created its own
Logistic Solution (shipped 127m items in Q2 ’20 - A 124% YoY INCREASE)
Through acquisitions, partnerships and in-house initiatives $MELI has created its own
Logistic Solution (shipped 127m items in Q2 ’20 - A 124% YoY INCREASE)
Payment & Credit Solutions (52m users and $ 170m in credits generated)
Website Builder ( http://MercadoShops.com.ar got 1.7m visits in Aug. 20 versus 650k in March 20)
Website Builder ( http://MercadoShops.com.ar got 1.7m visits in Aug. 20 versus 650k in March 20)
We will NOT focus on these business areas here
Next WEDNESDAY, we cover Mercado Envios Mercado Credito Mercado Shops Mercado Pago
Next WEDNESDAY, we cover Mercado Envios Mercado Credito Mercado Shops Mercado Pago
A look at $MELI financials
Sales of $ 878m in Q2 ’20 - growing 61% YoY with GMs of 49% (stable)
Op. Inc. of $ 89m - Coming from $ 7.3m in prev. Year
Cur. Assets of $ 4.8B vs. Cur. Liab. of $ 2.7B & LT debt of $779m
Ops. CF of $ 650m vs. $ 28m in prev. Year
Sales of $ 878m in Q2 ’20 - growing 61% YoY with GMs of 49% (stable)
Op. Inc. of $ 89m - Coming from $ 7.3m in prev. Year
Cur. Assets of $ 4.8B vs. Cur. Liab. of $ 2.7B & LT debt of $779m
Ops. CF of $ 650m vs. $ 28m in prev. Year
Leading #Ecommerce in LATAM CF positive operations and present in payments logistics and website builders
Key risks for now are theCurrency risk and Geopolitical situation in broader LATAM
Key risks for now are theCurrency risk and Geopolitical situation in broader LATAM
On the Currency risk, this is a hard nut to crack
It is happened before that the Argentine Peso fell 15% on a surprise political result
https://edition.cnn.com/2019/08/12/investing/argentina-peso/index.html
No one can tell it won’t happen again Always better to know the risks than to ignore them
It is happened before that the Argentine Peso fell 15% on a surprise political result
https://edition.cnn.com/2019/08/12/investing/argentina-peso/index.html
No one can tell it won’t happen again Always better to know the risks than to ignore them
On the Geopolitical situation, we can try to predict what this means for #Ecommerce
Whatever happens #Ecommerce is benefiting from secular tailwinds in LATAM that are hard to stop
Whatever happens #Ecommerce is benefiting from secular tailwinds in LATAM that are hard to stop
Just look at what happened with COVID #Ecommerce exploded, a quick look at these graphs shows how $MELI went VERTICAL https://www.marketplacepulse.com/stats/mercadolibre
GDP is set to grow at modest pace for most LATAM countries
Proj. GDP Growth 2021 in LATAM
2.5% in base case scenario / 1.5% in down scenario
1.5% in base case scenario / 1% in down scenario
1.5% in base case scenario / 1% in down scenario
Proj. GDP Growth 2021 in LATAM
2.5% in base case scenario / 1.5% in down scenario
1.5% in base case scenario / 1% in down scenario
1.5% in base case scenario / 1% in down scenario
3.2% in base case scenario / 2.5% in down scenario
The Bottom Line
$MELI is developing the logistics and payment solutions needed to overcome infrastructure hurdles
It is by far leading LATAM in #Ecommerce sales and is coming with its own alternative to $SHOP
$MELI is developing the logistics and payment solutions needed to overcome infrastructure hurdles
It is by far leading LATAM in #Ecommerce sales and is coming with its own alternative to $SHOP
Currency risk is real while geopolitical risk is mitigated by the secular growth of #ecommerce
With low internet penetration rates and low online sales as % of total sales Runaway for $MELI is huge
With low internet penetration rates and low online sales as % of total sales Runaway for $MELI is huge
50 PS is NOT CHEAP but this is a QUALITY business Leader of #Ecommerce in a region of 635m inhabitants
Value doesn’t come cheap and $SHOP and $AMZN were not cheap back in 2010 or 2016
Value doesn’t come cheap and $SHOP and $AMZN were not cheap back in 2010 or 2016
NEXT Wednesday for a deep dive into Mercado Pago Mercado Envios & more!
Please note that this is not a recommendation to buy - You are responsible for conducting your own research
Please note that this is not a recommendation to buy - You are responsible for conducting your own research
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Sources
✑ Investor presentation
✑ Company website
✑ SimilarWeb
Sources
✑ Investor presentation
✑ Company website
✑ SimilarWeb
✑ eMarketer
✑ MarketPlacePulse
✑ SPGlobal
✑ Labsnews
✑ MarketPlacePulse
✑ SPGlobal
✑ Labsnews