Will WhatsApp partnership boost MercadoLibre’s revenue?

MarketBeat.com – MarketBeat

Latin American e-commerce specialist MercadoLibre Inc. (NASDAQ: MELI) has only had a lower trend in 2022, and a new partnership could boost the stock.

Earlier this month, the Argentine company’s chief financial officer told Reuters that MercadoLibre would begin processing business payments for WhatsApp users.

WhatsApp, owned by Meta Platforms Inc. (NASDAQ: META), offers free cross-platform messaging features. Not well known in the US, but it is popular worldwide among family members, friends and business associates living in different countries.

While users have long had access to functionality including making text messages and voice and video calls, payment processing will be a new feature.

MercadoLibre CFO Pedro Arnt told Reuters the two companies are testing payment processing in Brazil. “This could be an opportunity for us to leverage WhatsApp effectively to generate more sales and better customer contacts,” said Arnt.

“Seamless payment experience”

In a the company’s blog post, WhatsApp addressed the Brazil initiative, saying, “Ultimately, we want people to be able to make a secure payment right from a chat with their credit or debit card. We recently launched this experience in India and are excited to test it in Brazil with more payment partners. This seamless payment experience will be a game changer for people and businesses who want to buy and sell on WhatsApp without having to go to a website, open another app or pay in person.”

WhatsApp has offered in-app payments in India since 2020. The Brazil test began in November.

MercadoLibre went public in 2007. In the early years it was seen as equivalent eBay Inc. (NASDAQ: EBAY) or Amazon.com Inc. (NASDAQ: AMZN ).

The company has expanded its operational capacity in the years since and now includes a lending unit and its own shipping business. It also operates an advertising platform that offers classified ads, which allow users to list users for vehicles, vessels, aircraft, real estate and services outside of the Marketplace platform.

MercadoLibre reported having more than 88 million unique users last quarter, with operations in 18 countries.

Strong earnings and revenue growth

Despite this year’s poor share price performance, sales and earnings growth have been decisive in recent quarters. MarketBeat analyst data for MercadoLibre display a “moderate buy” rating on the stock, with a price target of $1,317, representing a potential upside of 51.27%. A trend line connecting a series of recent lows illustrates how this price could be reached by mid-2023.

Since the company’s last earnings report on November 3, Citigroup has lowered its price target from $1,150 to $1,050. Nevertheless, it still reflects optimism about a potential upside of 23.34%.

MercadoLibre’s three-year revenue growth is 74%. Sales increased between 45% and 111% over the past eight quarters.

The bottom line has been more erratic, with losses in 2018, 2019 and 2020. Last year, the company returned to profitability, earning $1.67 per share. This year, analysts expect the company to earn $8.47 per share, an increase of 407%, and projected to increase another 63% next year to $13.78 per share.

That number has recently been revised higher, but not necessarily because analysts have weighed in on the potential of the WhatsApp partnership.

Will WhatsApp Partnership Increase MercadoLibres Revenue?

Shows of lost revenue

Earnings data compiled by MarketBeat show MercadoLibre missing bottom line views for the past three quarters. In addition, it missed top-line views in one of those quarters.

MercadoLibre’s chart shows a first-phase base that began in mid-August. It has corrected 31% so far, although it is working on its fifth consecutive week of decline. The stock is down 10.69% in the last month and 7.76% in the last three months.

So far, the stock is holding above its previous low of $600.68 in mid-June. But as of mid-session Wednesday, shares were trading below short- and long-term moving averages. This means that the share still has to carry out a rally that can make it a less risky investment candidate.

In general, it is better to focus on stocks that are starting a rally rather than getting stuck in a correction.

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