Episode notes
Daniel Mahncke and Shawn O’Malley return to Mercado Libre (NASDAQ: MELI), a holding in The Intrinsic Value Portfolio. The “Amazon of Latin America” just reported its 31st consecutive quarter of revenue growth above 30%, a streak no company of its size has ever matched, with revenue up 45% to $10.75 billion. In the same quarter, its operating margin fell to 6.3%, the lowest in years, and the stock trades below where it was originally pitched.
Daniel and Shawn cover the evolution of Mercado Pago, which processed $109 billion in payments last quarter, more than four times what the marketplace sold, and runs a $17.9 billion credit book growing 62% a year that has made it the sixth-largest card issuer in Brazil. They explain why booking losses on new credit cards upfront is the biggest reason margins fell, and why Pago is so important for the ecosystem. They then take a close look at Shopee, the biggest competitor for Meli in Brazil. They also cover Amazon, and the question that decides the whole thesis: will Brazil end up looking like the U.S., with one or two dominant platforms, or like China, where four players compete margins down to 2%? In the end, they walk through the updated valuation model and explain why they added to the position.
IN THIS EPISODE YOU’LL LEARN:
(00:00:00) Intro
(00:02:04) What changed since our last pitch
(00:05:57) How Mercado Pago keeps taking share
(00:07:25) Why Pago strengthens the flywheel
(00:21:48) Whether competition forces Meli’s hands
(00:44:29) How margins impact the Meli thesis
(00:51:08) What MELI’s stock is worth
(00:57:13) Whether MELI will stay part of The Intrinsic Value Portfolio
Disclaimer: Slight discrepancies in the timestamps may occur due to podcast platform differences.
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- Our Original Mercado Libre Episode.
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- Check out the Grab Episode.
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