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MercadoLibre Outperforms

Posted on Monday, Nov 17th 2008

At a time when many e-commerce companies are slipping on quarterly numbers, MercadoLibre (NASD: MELI), the Latin American online marketplace, exceeded all expectations for their Q3 results, released on November 11.

Revenues for the quarter stood at $40.3 million against the Street’s expectations of $37.8 million and represented 77% annual and 17% sequential growth.

By segment, marketplace revenue grew 75.0% to $31.7 million from $18.1 million in 3Q07. Payments revenue grew to $8.5 million for the quarter, up 82.9% from $4.7 million in 3Q07. Their MercadoPago Payment platform is a new product, and has the potential to become a PayPal like success for the company if consumers adopt it broadly in Latin America, which remains to be seen yet.

EPS of $0.14 exceeded the market’s expectations and grew by one cent over the previous year. Sequentially, EPS grew 100%.

During the quarter, MercadoLibre recorded 49% growth in gross merchandise volume and 87% growth in total payment volume. Surprisingly, they also saw good growth in the classifieds and ad sales businesses.

Last quarter they had added to an already strong automotive category by acquiring TuCarro.com, a site for buying and selling used cars, and realized synergies in the IT and back-end integration of the site. During this quarter, MercadoLibre acquired the Argentina, Chile, Colombia and Mexico operations of DeRemate.com, a provider of online auction services, for $40 million, adding to their existing leadership in the region. DeRemate was originally a competitor of the company.

According to the company, there were 3.9 million new registered users in the quarter, including users acquired through the acquisition of DeRemate. This brings the total registered user base to 32 million, an increase of 38% over the year.

Latin American Internet penetration rates are growing fast, and MercadoLibre is taking full advantage of the region’s increased connectivity. The company’s acquisition and growth strategies, as described by CEO Marcos Galperin, make the stock a good long-term hold

The stock had slipped to an all-time low of $9.35 earlier this month, but has recovered since and is trading at $10.27 with a market cap of $454.90 million. Following the announcement of the results, the stock had risen 11% to $11.45.

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