MercadoLibre (NASDAQ:MELI) Beats Expectations in Strong Q1, Shows User Growth

Petr Huřťák /
2023/05/03 4:09 pm EDT
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Latin American e-commerce company MercadoLibre (NASDAQ:MELI) reported results ahead of analyst expectations in the Q1 FY2023 quarter, with revenue up 35.1% year on year to $3.04 billion. MercadoLibre made a GAAP profit of $201 million, improving on its profit of $65 million, in the same quarter last year.

Is now the time to buy MercadoLibre? Access our full analysis of the earnings results here, it's free.

MercadoLibre (MELI) Q1 FY2023 Highlights:

  • Revenue: $3.04 billion vs analyst estimates of $2.88 billion (5.4% beat)
  • EPS: $3.97 vs analyst estimates of $3.13 (26.8% beat)
  • Free cash flow of $770 million, down 46.2% from previous quarter
  • Gross Margin (GAAP): 50.6%, up from 47.7% same quarter last year
  • Unique Active Users: 101 million, up 20 million year on year

Originally started as an online auction platform, MercadoLibre (NASDAQ:MELI) today is a one-stop e-commerce marketplace in Latin America.

Marketplaces have existed for centuries. Where once it was a main street in a small town or a mall in the suburbs, sellers benefitted from proximity to one another because they could draw customers by offering convenience and selection. Today, a myriad of online marketplaces fulfill that same role, aggregating large customer bases, which attracts commission paying sellers, generating flywheel scale effects which feed back into further customer acquisition.

Sales Growth

MercadoLibre's revenue growth over the last three years has been incredible, averaging 67.6% annually. This quarter, MercadoLibre beat analyst estimates and reported an excellent 35.1% year on year revenue growth.

MercadoLibre Total Revenue

Ahead of the earnings results the analysts covering the company were estimating sales to grow 19.1% over the next twelve months.

In volatile times like these we look for robust businesses with strong pricing power. Unknown to most investors, this company is one of the highest-quality software companies in the world, and their software products have been the default standard in critical industries for decades. The result is an impressive business that is up an incredible 18,152% since the IPO. You can find it on our platform for free.

Usage Growth

As a online marketplace, MercadoLibre generates revenue growth both by growing the number of users on the platform and the average user size in dollars.

Over the last two years the number of MercadoLibre's daily active users, a key usage metric for the company, grew 17.9% annually to 101 million. This is a solid growth for a consumer internet company.

MercadoLibre Unique Active Users

In Q1 the company added 20 million daily active users, translating to a 24.7% growth year on year.

Key Takeaways from MercadoLibre's Q1 Results

With a market capitalization of $63 billion, more than $4.62 billion in cash and with free cash flow over the last twelve months being positive, the company is in a very strong position to invest in growth.

We enjoyed seeing MercadoLibre’s strong user growth this quarter. And we were also excited to see that it outperformed Wall St’s gross merchandise value, total payment volume, revenue, and free cash flow expectations. Zooming out, we think this was a great quarter and shareholders will likely feel excited about the results. The company is up 3.77% on the results and currently trades at $1,332 per share.

MercadoLibre may have had a good quarter, so should you invest right now? It is important that you take into account its valuation and business qualities, as well as what happened in the latest quarter. We look at that in our actionable report which you can read here, it's free.

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The author has no position in any of the stocks mentioned.