MELI - MercadoLibre named JP Morgan's top tech pick

2023-08-07 12:42:48 ET

MercadoLibre ( NASDAQ: MELI ) rose 1.8% with JP Morgan naming the Latin American ecommerce retailer its top pick in tech.

The firm reiterated its Overweight rating on MELI and established a $2,000 price target — a Street high. That’s up from a prior $1,700 estimate. The average Wall Street analyst estimate is $1,548.

“We boost our estimates following broad-based strength in 2Q, increasing EPS 2023E and 2024E by 16% and 30%, respectively,” JP Morgan analysts led by Marcelo Santos wrote in a note.

“Moreover, improved disclosure by MELI reduces the EBITDA risk on a potential ARS devaluation, which should be mostly optical nonetheless, as cash flow should bear limited impact.”

Last week, MercadoLibre ( MELI ) reported second-quarter revenue of $3.4B surpassing the $3.27B average analyst estimate, while EPS of $5.16 compared to the expected $4.10.

Brazil and Mexico made “major contributions to the quarter’s growth,” the company said in a statement at the time. Brazil's economy is expected to grow 1.2% this year, according to a June World Bank forecast. Last week, South America's largest nation cut interest rates for the first time in three years amid slowing inflation.

JP Morgan also increased its revenue, Ebit and EPS estimates on MELI.

The firm pointed out that MELI trades at 35x P/E compared to 47x for Amazon.com ( AMZN ), with P/E for 2025 expected at 22x.

On Sunday, Seeking Alpha analyst Dilantha De Silva noted that while the retailer isn't cheap, "double-digit growth justifies premium valuation multiples given that we are still in the early innings of Latin America's e-commerce growth story."

The stock has 11 Strong Buy ratings from Wall Street analysts, seven Buys and four Holds.

Earnings have surprised positively for the past five quarters.

MELI is up 58% so far this year.

More on MercadoLibre:

• MercadoLibre: More Gains Ahead
• MercadoLibre, Inc. ( MELI ) Q2 2023 Earnings Call Transcript
• MercadoLibre bounces on strong results; Shares rise post-market

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