MELI Stock is Crashing - Here's Everything You Need to Know
Summary
Daniel provides a comprehensive analysis of Mercado Libre's (MELI) Q1 earnings, noting that while the stock fell significantly, the fundamental business performance was exceptionally strong. Revenue grew 49% year-over-year to $8.8 billion, driven by massive acceleration in Brazil and Mexico. The primary concern for the market was the decline in operating margins to 6.9%, which Daniel explains is a deliberate strategic choice by management to prioritize long-term market share over short-term profitability.
He addresses the bear case regarding the fintech segment, specifically the declining net interest margins after losses. While Mercado Libre is expanding its credit portfolio into riskier segments and lowering interest rates to entice users, Daniel highlights that non-performing loans (NPLs) actually decreased year-over-year. This suggests that their data-driven underwriting models are outperforming traditional banks, particularly in volatile markets like Argentina.
Mentioned Stocks
Reasoning: Daniel believes the stock is very undervalued, trading at 12 times its underlying free cash flow potential. He emphasizes the 49% revenue growth acceleration and the fact that non-performing loans are decreasing even as the credit portfolio doubles. He maintains a long-term thesis that the company will eventually realize massive profits and could become a trillion-dollar business in the coming decades.