How to Trade MercadoLibre Shares After Q1 Earnings Beat

June 07, 2023 14:13

You may have heard of Amazon, but have you heard of the “Amazon of Latin America”?

That’s the moniker given to MercadoLibre, an Argentine e-commerce company, which continues to grow incessantly despite challenging economic conditions. In May, MercadoLibre posted Q1 results that beat expectations, something which is becoming a regular occurrence for this company.

Learn more about MercadoLibre’s latest earnings, as well as how to trade the stock below.

Stock: MercadoLibre Inc
Symbol for Invest.MT5 Account: MELI
Date of Idea: 7 June 2023
Time Line: 6 - 12 months
Entry Level: $1,340.00
Target Level: $1,600.00
Position Size for Invest.MT5 Account: Max 5%
Risk: High
  • The Invest.MT5 account allows you to buy real stocks and shares from 15 of the largest stock exchanges in the world.

All trading is high risk and you can lose more than you risk on a trade. Never invest more than you can afford to lose as some trades will lose and some trades will win. Start small to understand your own risk tolerance levels or practice on a demo account first to build your knowledge before investing. 

Why Trade MercadoLibre? Q1 Performance Breakdown

Here are some of the key highlights from MercadoLibre’s first-quarter earnings report:

  • Net revenue rose 35% to $3.04 billion, comfortably beating the analysts’ forecast of $2.87 billion.
  • Earnings per Share (EPS) soared 205% to $3.97, eclipsing the anticipated $2.81.
  • Unique active users for the quarter was reported at 101 million, up from 81 million the previous year.

MercadoLibre reported first quarter earnings which beat analysts’ expectations. As we mentioned at the beginning, this is becoming an ongoing theme with the company, which has regularly beat expectations despite challenging operating conditions over the last couple of years.

As the dominant player in Latin America’s e-commerce market, MercadoLibre’s share price surged during the pandemic as online retail boomed. However, it subsequently struggled as inflation ran hot, interest rates rose and economic uncertainty grew. Nevertheless - unlike many other companies, despite a falling stock price – MercadoLibre has continued to churn out robust results throughout the challenging economic climate.

Although share price remains considerably lower than its all-time high, the stock has been on a bullish run so far in 2023, gaining more than 50% year to date, and some analysts predict that this trend will continue over the next 12 months.

Why the strong performance? Much of MercadoLibre’s historic success can be attributed not only to e-commerce, but to its diversification away from this core business, which has allowed it to create a business model that takes care of every step of the customer’s journey.

Mercado Envios handles shipping, Mercado Credito extends loans and Mercado Pago provides payment processing solutions. These different offerings blend together to create an ecosystem in which each division complements and strengthens the others. Of the three divisions highlighted, Mercado Pago in particular has been a key revenue driver, thriving in a region where many remain unbanked and reliant on payment processing services.

However, it might not all be plain sailing ahead for MercadoLibre. Although historical performance has been strong, that doesn’t mean that it will continue to be so in the future.

As the economic outlook remains uncertain and interest rates rise, e-commerce could suffer, and the number of bad loans on the books of Mercado Credito could increase (although management have previously stated their intention to slow growth in this division to avoid such a scenario). Of particular concern will be Argentina, one of MercadoLibre’s largest markets, where rampant inflation is currently in excess of 100% amidst worrying economic conditions.

MercadoLibre Stock Forecast - What Do the Analysts Say?

According to analysts polled by TipRanks for a MercadoLibre stock forecast in the past 3 months, there are currently 8 buy, 1 hold and 0 sell ratings on the stock. The highest price level for a MercadoLibre stock forecast is $1,770.00 with the lowest price target at $1,350.00. 

The average price target for a MercadoLibre stock forecast is $1,602.78.

Source: TipRanks - 7 June 2023

An Example Trading Idea for the MercadoLibre Stock Price

An example trading idea for MercadoLibre could be as follows:  

  • Buy the stock on a break above the post-earnings high of $1,340.00. 
  • Target just below the average analyst price target at $1,600.00. 
  • Keep your risk small at a maximum of 5% of your total account.   
  • Time Line = 6 - 12 months  
  • If you buy 5 MercadoLibre shares:  
    • o If target is reached = $1,300.00 potential profit ($1,600 - $1,340 * 5 shares).

Remember that markets go up and down and the share price is unlikely to move up in a straight line. In fact, it may even go much further down before it rises, if it rises at all.

Be sure to exercise good risk management and always know how much you could potentially lose on a trade, the risks involved and the costs.

With the Admirals Invest.MT5 account you can buy and sell US stocks with a commission from $0.02 per share. That means buying 5 MercadoLibre shares would result in a commission of $0.10 ($0.02 * 5 shares) for executing a per-side transaction.

However, there is a low minimum transaction fee of $1. So, the example trading idea above would result in a commission of just $1 overall! 

How to Buy MercadoLibre Shares in 4 Steps  

With Admirals, you can buy shares in companies like MercadoLibre with a low commission of just $0.02 per share and a low minimum commission of just $1 on US stocks. 

  1. Open an account with Admirals to access the dashboard.   
  2. Click Invest on one of your live or demo accounts to open the web platform.   
  3. Search for your stock and open the instrument page.   
  4. Enter the number of shares you wish to purchase on the right-hand side of the screen and click ‘Buy’ to send your order to the market!
Depicted: Admirals Platform - MercadoLibre Inc. Date Captured: 6 June 2023. Past performance is not a reliable indicator of future results.

Click on the banner below to trade MercadoLibre stock today! ▼▼▼ 

Do You See the MercadoLibre Stock Price Moving Differently?   

Remember that all analytics and trading ideas are based on the personal view and experience of the author.  

If you believe there is a higher chance MercadoLibre’s share price will move lower, then you can also trade short using a CFD (Contracts for Difference) trading account which Admirals also provide.  

The Trade.MT5 and Trade.MT4 accounts allow you to speculate on the price direction of stocks and shares using CFDs.  

This means you can trade long and short to potentially profit from rising and falling stock prices. Learn more about CFDs in this article: How to Trade CFDs.


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Roberto Rivero
Roberto Rivero Financial Writer, Admirals, London

Roberto spent 11 years designing trading and decision-making systems for traders and fund managers and a further 13 years at S&P, working with professional investors. He has a BSc in Economics and an MBA and has been an active investor since the mid-1990s