MercadoLibre Soars to Record as Payments Growth Impresses Street

(Bloomberg) -- Latin American e-commerce retailer MercadoLibre Inc. is getting a boost from its payments push.

American depositary receipts for the Buenos Aires-based company jumped as much as 20 percent to a record high on Friday after first-quarter revenue beat the highest analyst estimates. “Strong” payments growth overshadowed a slowdown in gross merchandise volume, according to analysts, many of whom raised their price targets on the stock.

“Our payments business continues to grow rapidly while we also have become more efficient in marketplace shipping spend,” Chief Financial Officer Pedro Arnt said during a conference call on Thursday.

MercadoLibre in March raised $1.9 billion through a public share offering that Arnt said “gives us greater balance sheet flexibility” and is expected to fund the growth in payment initiatives, as well as the development of logistics capacity.

Credit Suisse, Stephen Ju

• Price target raised to Street-high $640 from $520; rates outperform
• Highlighted that MercadoLibre spent less on free shipping subsidies and reported greater-than-expected TPV/payments revenue; meanwhile, GMV fell short of Credit Suisse's expectations
• Said Wall Street numbers are “too low” and don't credit the company for various products already in the market, such as advertising, seller working capital loans

BTIG, Marvin Fong

• Price target increased to $610 from $535; rates buy
• MercadoLibre's payments growth and drop in shipping subsidies “more than offset” soft GMV in the first quarter
• The company's off-platform TPV delivered “eyebrow-raising” growth in the quarter
• Raised TPV and net revenue estimates due to “‘robust trends”

Stifel, Scott Devitt

• Price target raised to $560 from $500; rates hold
• Momentum in mPOS and digital wallet continue to drive underlying payments strength
• MercadoLibre has taken steps to improve profitability on the platform
• Long-term opportunity remains attractive given company's leadership position in e-commerce and strong traction in payments

Bradesco BBI, Richard Cathcart

• Outperform rating maintained
• Results were above expectations, with accelerating growth in the firm's payments business and positive bottom line
• Results once again “show strong progress around the company's goal of becoming increasingly focused on payments”
• Slowdown in GMV growth seen as a negative highlight; fintech business still expected to accelerate further

Cowen, Tom Champion

• Price target raised to $540 from $387; rates market perform
• Off-platform payments are inflecting and marketplace shipping costs are coming back in-line; impressive momentum across the board

What Bloomberg Intelligence says

“MercadoLibre's strong start to the year reminds us of what got it to this position -- investment and spending that will continue.”
-- Julie Chariell, senior consumer products analyst
-- Click here for the research

To contact the reporter on this story: Vinícius Andrade in São Paulo at vandrade3@bloomberg.net

To contact the editors responsible for this story: Brad Olesen at bolesen3@bloomberg.net, Catherine Larkin

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