MercadoLibre – Amazon South

MercadoLibre – Amazon South

MercadoLibre (Meli), an e-commerce and fin-tech business operating in South America, released their Q3 2023 results last Wednesday. During the quarter, Meli’s revenue surged by 40% year on year to $3,760 million. E-commerce segment grew 45%, while Fintech increased 37% year on year. Furthermore, income from operations saw a surge of 131%, totalling $685 million, resulting in an operating margin of 18.2% for the business for the quarter.

Meli is predominantly recognized for their e-commerce platform, MercadoLibre, which is operational in Brazil, Argentina, Mexico, and a few other South American countries. Essentially, they facilitate companies in selling and distributing products through their platform. In the most recent quarter, the commerce segment made up 54% of their total revenue, with the fintech division (MercadPago) making up the remaining 46%. Meli’s fintech arm aims to further evolve into a comprehensive financial service provider in South America, catering to both businesses and individuals. Retail customers have the option to use Meli’s credit card facilities, while businesses can utilize their point-of-sale and online payment technology.

Meli faces a number of challenges. Both the ecommerce space and fintech space are highly competitive. In the ecommerce space, it can take quite a while for companies to become profitable. Customers can be quite fickle and move to different services at their pleasure. Meanwhile, the fintech space presents its own set of hurdles, including regulatory complexities and formidable competition from established players well-versed in the field.

Presently, one of the primary hurdles facing Meli is currency devaluation in the regions they operate. Over the past two years, the dollar, which Meli reports in, has exhibited a consistent strengthening trend. This stands in contrast to the currencies of numerous other developing nations, which have experienced depreciation. Specifically, the Argentine Peso has seen a reduction of just over half its value relative to the dollar since November 2022.

Companies that operate in underserviced regions have a lot of opportunity to build, however there are many challenges that come with it.

MELI is held by Lunar Capital’s Offshore Portfolio clients.

Key Indicators
Index / Fund / Rate
Start of Year
Last Week
This Week
% Change YTD
Index / Fund / Rate
Lunar BCI WW Flexible Fund
Start of Year
141.43
Last Week
170.40
This Week
172.81
% Change YTD
22.19% Lunar Capital increasesymbol
Index / Fund / Rate
JSE ALSI
Start of Year
73 049
Last Week
69 452
This Week
72 856 Lunar Capital increasesymbol
% Change YTD
-0.26% Lunar Capital stocktake arrow down
Index / Fund / Rate
NASDAQ Composite
Start of Year
10 467
Last Week
12 643
This Week
13 478 Lunar Capital increasesymbol
% Change YTD
28.77% Lunar Capital increasesymbol
Index / Fund / Rate
S&P 500
Start of Year
3 840
Last Week
4 117
This Week
4 358 Lunar Capital increasesymbol
% Change YTD
13.49% Lunar Capital increasesymbol
Index / Fund / Rate
Prime Lending Rate
Start of Year
10.50%
Last Week
11.75%
This Week
11.75%
% Change YTD
11.90% Lunar Capital increasesymbol
Index / Fund / Rate
USD/ZAR
Start of Year
16.98
Last Week
18.84
This Week
18.25 Lunar Capital stocktake arrow down
% Change YTD
7.48% Lunar Capital increasesymbol
Index / Fund / Rate
EUR/ZAR
Start of Year
18.44
Last Week
19.91
This Week
19.60 Lunar Capital stocktake arrow down
% Change YTD
6.29% Lunar Capital increasesymbol
Index / Fund / Rate
Brent Crude ($'barrel)
Start of Year
85.95
Last Week
90.01
This Week
85.17 Lunar Capital stocktake arrow down
% Change YTD
-0.91% Lunar Capital stocktake arrow down
Source: Iress

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The Lunar BCI Worldwide Flexible Fund Fact Sheet  can be read here.
This stocktake is prepared for the clients of Lunar Capital (Pty) Ltd. This stocktake does not constitute financial advice and is generated for information purposes only.

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