Latin America is a region that often struggles with inflation and, at times, political instability. With higher inflation around the world, these issues only become more of a concern.
Nevertheless, the region may also present opportunities, and these conditions have not prevented the Argentinian e-commerce giant MercadoLibre (MELI -0.39%), which continues to thrive amid the turmoil. Not only has it recorded massive growth in revenue and earnings, but it also continues to strengthen a business model that benefits investors despite political challenges.
MercadoLibre in the third quarter
Indeed, looking at MercadoLibre’s third quarter results, it might seem that the bear market never happened. Revenue of $2.7 billion increased 61% from the prior year quarter on a currency neutral basis.
The company’s third-quarter net income of $198 million rose 57%. A slightly faster growth rate in the cost of net revenues slightly reduced the company’s earnings growth.
Granted, the bear market may soon catch up with the results. Analysts predict revenue growth of 47% for 2022 and 24% in 2023. Moreover, this fear has already caught up with the stock price. Even with the rapidly growing numbers, internet retail and direct marketing stock has lost more than half of its value since the summer of 2021.
How MercadoLibre succeeds in meeting the challenges of Latin America
But even if it presents a certain slowdown, MercadoLibre has shown that it can thrive in difficult conditions. She created Mercado Pago when she needed a solution for her cash-only customers to shop online. Mercado Pago was so successful that the company offered its services to buyers and sellers who were not buying from MercadoLibre.
Plus, he found more ways to thrive due to The challenges of Latin America. According to the IMF, inflation is now over 70% in its home market, Argentina. Yet Mercado Pago attracts customers due to rising prices as it pays interest on deposits. Moreover, thanks to Mercado Credito, it can offer loans without using credit cards in the same business environment.
Such offers appear to have boosted MercadoLibre’s results. It processed more than $32 billion in payments during the third quarter, a 76% increase from the year-ago quarter.
Additionally, to cater to product delivery, it has introduced Mercado Envios in some of its countries. This allows the company to store, pack and deliver packages for its customers, often with same-day or next-day delivery.
Moreover, the power of these e-commerce, fintech and fulfillment segments seem to add synergies. Since they can work together to provide a more seamless buying and selling experience, MercadoLibre can better deal with companies such as Amazon and Sea Limitedeach of which is trying to compete more actively in Latin America.
MercadoLibre is worth considering now
MercadoLibre continues to grow as if the bear market never happened. Revenues and profits are still growing at a rapid pace, and Mercado Pago is driving much of that growth. And with Mercado Envios, it has formed an ecosystem that can thrive in a harsh environment and meet the challenges of powerful competitors.
Additionally, since the bear market has affected the stock, investors can buy this explosive growth stock at over 50% off the peak. This increases the likelihood that the stock could offer investors as MercadoLibre transforms the retail, fintech and logistics markets in its home region.
John Mackey, CEO of Whole Foods Market, an Amazon subsidiary, is a board member of The Motley Fool. Will Healy holds positions at MercadoLibre. The Motley Fool holds positions and recommends Amazon, MercadoLibre and Sea Limited. The Motley Fool has a disclosure policy.