No. of Recommendations: 4
MELI (MercadoLibre Inc) is a Brazilian equivalent of Amazon, but sales mostly localised in Brazil, and the online shopping market something like how the US was in 2002 - so in theory a chance to get in early (the effective transaction volume - for those actually using cards and the habit to shop online - will be several times larger 15 years from today).
They also have a credit card and lending business, which is another immature market in Brazil with a huge runway.
It's an intriguing company. It actually started in Argentina, and expanded throughout Latin America, but as you say, its biggest market is now Brazil (with 53% of last year's sales), Mexico and Argentina being #2 and #3 at 22% and 20%, and 4% in the rest of the world. And their financial services (fintech) activities, which are likely to have higher margins, have been growing faster than its online marketplace activities, now representing just over half their business.
At 61 times earnings, it seems a bit expensive, but its very fast growth (over 30% last year, although the growth rate is slowing a bit) and its large market opportunity make it possible that an investment at current prices will work out very well. 25x free cash flow seems about right, and given that that is lower than the S&p 500's multiple (27x), one can at least say that the price makes more sense than the average big US firm.
dtb
