New Trade for September 7th, 2023

Right now, emerging-market stocks are cheaper than they’ve been over the past 15 years—as measured by the Morningstar Emerging Markets Index—while U.S. stocks look overpriced compared with their long-term average valuations based on Morningstar’s U.S. counterpart. Emerging-market stocks look poised to gain as multiple tailwinds emerge, including a weakening U.S. dollar and maturing economic conditions in several emerging-market countries. 

There are already signs of a rotation into emerging markets underway as investors prepare their portfolios for the world after monetary tightening. Today’s recommendation is a gem among emerging markets stocks that’s easy to get excited about…

MercadoLibre (MELI)

MercadoLibre is the undisputed titan in South America’s online retail arena. With a presence in 18 different countries and dominating market share in places like Brazil, this e-commerce powerhouse has outpaced even the likes of Amazon in the region.

Over the past decade, MercadoLibre’s growth trajectory has been nothing short of awe-inspiring. And guess what? The pandemic-led tailwinds only fueled the fire, accelerating e-commerce adoption and solidifying its position as a significant player in South America’s bustling digital economy.

Let’s talk numbers, shall we? Brace yourself for astonishing records! With a jaw-dropping 5-year average revenue growth of over 56% and forward revenue estimates surpassing 30%, MercadoLibre is on a rocket ride. Their operating cash flow growth is soaring over 30% year-over-year, a staggering 4,500% higher than the sector median.

Just when you thought it couldn’t get any better, MercadoLibre’s recent second-quarter performance wowed us all. With GAAP earnings per share of $5.16, they crushed estimates by a whopping 88 cents. And their revenue soared to $3.42 billion, a solid 32.0% year-over-year increase, outpacing forecasts by a cool $150 million. Oh, and let’s not forget their Total Payment Volume, which reached an impressive $42.1 billion, marking a phenomenal 96.6% year-over-year growth on an FX-neutral basis.

MercadoLibre is a force to be reckoned with, and its growth story is far from over. So, if you’re on the lookout for a powerhouse stock with immense potential, look no further.