MercadoLibre Beats Revenue Estimates, Gains Market Share in Brazil

(Bloomberg) — Latin American e-commerce retailer MercadoLibre Inc. grew its revenue more than expected and gained market share in Brazil even as Asian players continue to strengthen their footprint in the company’s largest market.

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MercadoLibre posted a net revenue of $2.1 billion in the fourth quarter, a 61% increase from a year earlier and slightly above analyst estimate of $2 billion, according to a statement Tuesday. The company reported gross merchandise volume of $8 billion, roughly in line with expectations, fueled by growth in Brazil, where firms including Sea Ltd.’s Shopee e-commerce platform have been building up their local operations.

“We’ve gained share in Brazil, even with the Asian players,” said Andre Chaves, a senior vice president at the Buenos Aires-based firm, in an interview. “We look at competition carefully and we try to learn, but that shouldn’t change our strategy. Everything in the quarter points to a sustainable growth path.”

Despite strong revenues, MercadoLibre posted a net loss per share of 0.92 cents on the dollar, below analyst expectations of gains of 0.73 cents per share. The results reflect that the fourth quarter is a time of year that concentrates high sales volume but also high expenses, such as marketing, discounts and rebates, Chaves said.

“We share this with our sellers but we have to put some of the investments ourselves.”

Read More: MercadoLibre Is Changing the Way Latin Americans Shop—and Pay

The firm’s credit portfolio grew to over $1.7 billion in the third quarter, up from $1.1 billion in the previous three months, while non-performing loans improved at a moment when investors are concerned about potential deterioration in credit quality in Brazil amid rising inflation and rates. The company is managing default risk levels in its credit book “very closely,” Chief Financial Officer Pedro Arnt said in the company’s earnings call.

MercadoLibre acquired Brazilian logistics firm Kangu last year and recently announced the purchase of stakes in two crypto firms. Chaves declined to comment on possible merger targets and on how the company may further incorporate crypto functionalities in its back-end or its user-facing products.

Shares in MercadoLibre were up 10% in after-market trading. The stock is down 55% since peaking in January of 2021, battered by rising U.S. rates and fears over fierce competition. MercadoLibre has 24 buy-equivalent recommendations from analysts, five holds and no sell, Bloomberg data show.

Other key points from the earnings call:

MercadoLibre is “encouraged” by the number of Brazilian users transacting with crypto through the company’s digital wallet
The company will continue to invest in key areas that are part of its strategy including logistics, category expansion, roll-out of fintech products and credit
The advertising business relative to total gross merchandise value has crossed the 1% mark, a milestone for the company

(Updates with CFO comments and stock move starting in sixth paragraph.)