that MercadolibreThe stock (WKN: A0MYNP) is doing a better job again at the moment. Since their lowest at 585.80 EUR, the shares have now risen again to 666.70 EUR. Starting from its record high of over 1,600 euros, the stock is still more than half in the red.
However, it can mean great potential: Is the Mercadolibre stock a candidate that is sure to double in value in five years? Optionally. Of course, nothing is guaranteed. But valuation, growth and the current position in general could speak for it.
Mercadolibre share: the opportunity!
The possibility in Mercadolibre shares is relatively easy to outline. With a market value of $ 35.2 billion, the market valuation is now quite small. But the operational basis has become very, very much in recent years. Revenue for the most recent quarter was $ 2.2 billion. This means that the ratio between price and sales looks relatively cheap at a value of just over 4.
Of course, price-to-sales is not everything, it requires continued growth. With a 67% increase in revenue in the most recent quarter (and in local currencies), solid growth continues. I believe that this technology company can continue to perform solidly despite inflation concerns, interest rate developments and other factors. The simple reason for this: Latin America’s core market is already familiar with inflation and economic crises. Despite this, the stock has not performed poorly in the past.
Mercadolibre’s management has designed a unique, powerful ecosystem. After all, the range of services extends beyond e-commerce with its own logistics. The market for digital payment services has also expanded to include loans, cryptocurrencies, asset management and other peripheral areas. This ecosystem has become so sticky that consumers would incur high switching costs if they traded with a competitor. Although Mercadolibre was no longer a top-notch in e-commerce, there is a chance that the payment service provider would perform strongly.
Of course there are also risks …
Of course, there are also risks with the Mercadolibre stock. One primary for me is the market, which is less secure and hit by economic crises. Latin America is not as stable as North America or Europe. A further deteriorating consumer climate may also have a negative effect here. But there is another risk: competition.
Other tech players are trying to gain a foothold in e-commerce in core markets like Brazil. The market is still very young and small. This can be a disadvantage, but it also makes room for more than one intact growth story.
Ultimately, I think the Mercadolibre stock is priced after a worst-case scenario with its current valuation. I assess the chance that this share will double in value over the next five years as significantly, significantly greater than the share price falls during this period and based on today’s valuation.
Article Mercadolibre stock: sure to double in value in 5 years? appeared for the first time on The Motley Fool Germany.
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Vincent owns shares in Mercadolibre. The Motley Fool owns shares in and recommends MercadoLibre.
Broget Fool Germany 2022