the free market-The stock (NYSE:A0MYNP) rose 27.6% in the last week of trading. From a share price of approximately 832 euros, it rose to 1,062 euros. This corresponds to a growth of approximately this amount.
Two questions are more crucial: Why has the stock risen so much? And can Mercadolibre continue to catch up? After all, the stock is still about 37% below its all-time high. That can be the foundation for continued strong long-term returns.
Mercadolibre shares: therefore catching up!
I am convinced that the comparatively cheap fundamental valuation was the first trigger for last week’s trend change. In addition to the general feeling, good. But that is another topic.
Meanwhile, with a market capitalization of less than US$50 billion, the valuation move has been very cheap. With a price-to-sales ratio of less than 7, the stock was extremely cheap. Of course, the prospects for higher growth and the company-oriented investment thesis also play a role.
Mercadolibre’s actions represent an opportunity to create Amazon, PayPal and Shopify Latin America. Or maybe even more. This means that there are many megatrends: e-commerce in all its facets, digital payment services, and cryptocurrencies. As well as our own strong logistics, which is definitely a competitive advantage.
With further growth, Mercadolibre’s stock may become cheaper even in the medium term. Most recently, full-year sales topped $7 billion. This means that a large ecosystem is now also developing in purely quantitative terms, already linking customers and consumers in terms of quality. Latin America as a whole is a market with 600 million consumers. So there is definitely still room for growth.
In the case of the Mercadolibre stock, the broader market appears to be seeing more opportunity again. A good opportunity, yes. With its low valuation, it has an attractive risk/reward profile.
Even now it is not too expensive!
After the price increase, the Mercadolibre share is still not too expensive. With a price/sales ratio of just over 8 and the megatrend market investment thesis still going strong, there is a lot of potential. It turns out that the stock of Latin Americans has recently been especially punished. But also that if the market loosens up significantly, this stock could be ready for a quick turnaround.
The article Why Mercadolibre shares rose 27.6% first appeared in The Motley Fool Germany.
Vincent owns Mercadolibre shares. The Motley Fool owns shares of and recommends MercadoLibre.
Motley Fool Germany 2022