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WIKI ANALYSIS
MercadoLibre (Nasdaq:MELI) is the largest online trading platform in Latin America. They are market leaders in e-commerce in each of Argentina, Brazil, Chile, Colombia, Ecuador, Mexico, Peru, Uruguay and Venezuela, based on unique visitors and page views during 2007. Additionally, they have recently launched online trading platforms in Costa Rica, the Dominican Republic and Panama. With a market of over 550 million people and a region with one of the world’s fastest-growing Internet penetration rates, they provide buyers and sellers a robust online trading environment that fosters the development of a large and growing e-commerce community. They offer a technological and commercial solution that addresses the distinctive cultural and geographic challenges of operating an online trading platform in Latin America.
Company Overview
Stock = MELI The objective of the firm is to provide a technical launching pad which may allow markets to become ever more efficient in Latin America. Mercado Libre began by pioneering online commerce in the Latin American region under the idea that regional markets were fragmented, lacking breath and asymmetrically informed.
Business Financials
- Due to a high volume of legal actions against the company, as of the end of 2009 the company holds 1,071, 757 USD in reserve to deal with those actions in which it considers there is a probable loss (316).
- In 2008 the company initiated a stock repurchase plan that totaled 2,590,742 USD and was further continued into 2009 as the company wrote put option on its stock. The options were not exercised at the expiration date allowing the company to recognize a gain of 185,000 in the first half of 2009 and 302,997 in the second half.
- Growth in 3Q09 was derived from a 34% increase in the gross merchandise volume transacted through the Mercado Libre marketplace which was partially offset by a decrease in the take rate. A measure defined as Marketplace revenues as a percentage of gross merchandise volume. This decrease was to due to increased penetration in smaller countries were the take rate is naturally smaller, a higher growth in final value listings, and Latin American currency devaluation.
- For 12.1MM in cash and cash equivalents Mercado Libre acquired a regional competitor DeRemate.com with operations in Mexico, Brazil, Colombia, Ecuador, Peru, Uruguay and Venezuela.
- In 2007 the company launched its initial public offering (IPO) raising 49,573,239 in cash after the sale of 3MM common stock shares.
Business Segments
The business segments of the company are divided by the company in which they hold their online commerce platform in.
- Brazil (25.857% of Net Contribution)
- Argentina (17.539% of Net Contribution)
- Mexico (6.343% of Net Contribution)
- Venezuela (16.998% of Net Contribution)
- Other countries (6.224% of Net Contribution)
Though the company also recognizes two distinct services it provides: the MercadoLibre marketplace and the MercadoPago online payment solutions. The first is a fully automated online commerce platform that allows individuals or corporations to sell items in a variety of sale formats. The platform further provides a classifieds service for large parcel items like motor vehicles and real estate. The latter is an integrated online payment system that provides safe and efficient transactions.[2]
Revenue Drivers
Revenue drivers in the Mercado Libre Marketplace are: listing fees, optional features fees, final value fees, and online advertising fees. Revenues from the online payment solutions come from fees charged to the buyers and sellers.
Trends and Forces
Population and Internet
With a population of 550MM and one of the highest internet penetration rates in the world, online companies in Latin America face high expected growth rates. [3]
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