Mercado Libre should deliver a fourth quarter with strong execution in both the commerce and fintech areas, assesses Goldman Sachs in a report.
The bank projects growth in gross merchandise value (GMV) of 17% for Brazil for the company, growth in total volume of payments (TPV) of 73%, revenue expansion of 40% and operating profit margin of 6.1% (a gain of 500 basis points for the year).
The house also considers that, although inflationary pressures have diminished in Brazil, the future curve is no longer pricing in significant rate cuts for 2023, given the uncertainty surrounding the fiscal scenario under the economic team of the new government.
“From Mercado Libre’s point of view, this means that the possible improvements of lower financing costs for its payments operation are less likely to materialize”, comment analysts Irma Sgarz, Felipe Rached and Gustavo Fratini.
The bank also estimates that the company can benefit from the market share left by Americanas amid the retailer’s judicial recovery process announced last week.
Analysts estimate that around R$20 billion of the R$40 billion in gross value of Americanas online merchandise comes from durable goods, a category in which Mercado Libre has not invested as much, with a focus on third-party products (3P).
They recall that, already in 2019-2020, the e-commerce giant had shown interest in the durable goods segment through its own merchandise operations, but the company balanced its investments in the category amid weakened demand from mid-2021.
“As the demand outlook stabilizes, we may see MercadoLibre lean towards this initiative, but we still expect the company to be disciplined on prices/margins. That said, as suppliers may seek rebalancing distribution to reduce their exposure to Americanas, we believe that MercadoLibre starts to see bargaining power shifting in its favor,” they state.
Goldman Sachs has a buy recommendation and a target price of US$1,520 for the company’s shares, which represents a potential appreciation of 38.8% over the current quotation.
With information from Valor Econômico