🚨61% GROWTH ALERT 🚨

#Ecommerce πŸ› is GROWING by 20% in 2020 in this REGION 🌎 of 635m inhabitants

Overall #Ecommerce sales will reach $ 116B by 2023 πŸ“ˆ Coming from $ 70B in 2019

Here is a company that has many DETRACTORS ☠️ But is HARD to IGNORE πŸ‘‘

Here is an EASY thread πŸ‘‡
$MELI Mercado Libre was founded in 1999 by Marcos Galperin (current CEO) πŸ‘€

It operates an online marketplace and auctions in 18 countries in LATAM 🌎

$MELI also offers shipping solutions 🚚 for marketplace users, digital payments 🏦 and advertising solutions πŸ“£
Looking good? Well there is much more πŸ‘€

πŸ› Mercado Libre - Marketplace

πŸ’» Mercado Shops - Online storefronts / website builder for sellers

πŸ“£ Mercado Libre Publicidad - Advertising

🏠 Mercado Classificados - Real Estate and automotive
🚚 Mercado Envios - Logistics

🏦 Mercado Pago - Payments

πŸ’° Mercado Credito - Credits
πŸ› Mercado Libre - Marketplace

Sellers pay commissions on their sales πŸ›ƒ $MELI’s income us thus a percentage of the Gross Merchandise Volume (GMV)

The 52m users (45% growth YoY) can buy whatever they want πŸ‘‰ Washing machines 🧼 phones πŸ“± food 🍱 chairs πŸͺ‘ books πŸ““ sport 🏈
Items sold reached 179m - growing 101% YoY πŸ“¦ All of this is supplied by the more than 11m sellers πŸ›’

GMV reached $ 5B during Q2 ’20 πŸ“ˆ An increase of 102% on FX neutral basis (49% in USD terms)
Sounds like huge numbers 🀯 Well, there are two sides of the same coin 🎭

πŸ“ˆUsers (45% users growth) are buying more items that are more expensive resulting in 102% GMV growth - In LOCAL CURRENCY

πŸ“‰ When translated to USD dollars the YoY GMV growth shrinks to 49%
βš–οΈ This ie because LATAM currencies (Arg. Peso, Br Real) are weakening πŸ“‰ versus the USD
πŸ‡§πŸ‡· On 16th of Sept 2019, 1 Brazilian Real got you 0.25 USD πŸ‡ΊπŸ‡Έ Today you get 0.19 USD (coming from a low of 0.17)

πŸ‡¦πŸ‡· On 16th of Sept 2019, 1 Argentine Peso got you 0.25 USD πŸ‡ΊπŸ‡Έ Today you get 0.013 USD (and keeps weakening)
πŸ‡²πŸ‡½ On 16th of Sept 2019, 1 Mexican Peso got you 0.51 USD πŸ‡ΊπŸ‡Έ Today you get 0.047 USD (coming from a low of 0.040)

More on the FX and political risk at the end of this thread πŸ”₯
How does $MELI compares to competition 🀺 Let’s look at key regions 🌎

πŸ“Œ Numbers are in million visits / month

πŸ‡§πŸ‡· $MELI 260 > Americanas 116 > OLX 106

πŸ‡¦πŸ‡· $MELI 30 > Fravega 7.8 > OLX 3

πŸ‡²πŸ‡½ $MELI 117 > $AMZN 52 > Coppel 25

πŸ‡¨πŸ‡΄ $MELI 44 > Falabella 9.6 > OLX 6.8
$MELI leads ALL OF LATAM πŸ‘‘ Let’s have a look at the TAM πŸ‘₯

#Ecommerce in LATAM is set to reach $116B by 2023 πŸ“ˆ Coming from $ 70b in 2019

The COVID pandemic brought 11m new users online πŸ’» Totalling 192m digital buyers (around 34% of full potential)
Small share of online buyers πŸ› and low internet penetration 🌐 represent a huge opportunity

βœ… In LATAM #Ecommerce retail sales as percentage of total sales stands at 4.7% in 2020 🀏

ℹ️ For comparison, this number stands at 16.1% the USA and Europe (coming from 12% pre-COVID)
βœ… Internet penetration πŸ“‘ stands at 59% in 2020 coming from 45% in 2015

ℹ️ For comparison, this number stands at 90% the USA and Europe

Leaving plenty of room for growth πŸ“ˆ
So here we have β€œTHE” #Ecommerce leader of LATAM 🌎

βœ… The only problem identified so far is the currency risk πŸ’²

🚫 In the background of course, we can hear some chatter about the weak infrastructure 🚚 and payment systems πŸ’³ in LATAM
When confronted to a roadblock ⛔️ leaders innovate πŸ‹οΈ and laggards complain πŸ₯΄

Through acquisitions, partnerships and in-house initiatives $MELI has created its own πŸ‘‡

🚚 Logistic Solution (shipped 127m items in Q2 ’20 - A 124% YoY INCREASE)
🏦 Payment & Credit Solutions (52m users and $ 170m in credits generated)

πŸ’» Website Builder (MercadoShops.com.ar πŸ‡¦πŸ‡· got 1.7m visits in Aug. 20 versus 650k in March 20)
We will NOT focus on these business areas here πŸ“Œ

‼️ Next WEDNESDAY, we cover Mercado Envios 🚚 Mercado Credito 🏦 Mercado Shops πŸ’» Mercado Pago πŸ’³
A look at $MELI financials

πŸ“ˆ Sales of $ 878m in Q2 ’20 - growing 61% YoY with GMs of 49% (stable)

πŸ’΅ Op. Inc. of $ 89m - Coming from $ 7.3m in prev. Year

πŸ’° Cur. Assets of $ 4.8B vs. Cur. Liab. of $ 2.7B & LT debt of $779m

πŸ’Έ Ops. CF of $ 650m vs. $ 28m in prev. Year
βœ… Leading #Ecommerce in LATAM 🌎 CF positive operations πŸ’΅ and present in payments πŸ’³ logistics 🚚 and website builders πŸ’»

⛔️ Key risks for now are theπŸ’²Currency risk and 🌎 Geopolitical situation in broader LATAM
On the πŸ’²Currency risk, this is a hard nut to crack 🀯

πŸ“‰ It is happened before that the Argentine Peso fell 15% on a surprise political result

edition.cnn.com/2019/08/12/inv…

No one can tell it won’t happen again ‼️ Always better to know the risks than to ignore them
On the 🌎 Geopolitical situation, we can try to predict what this means for #Ecommerce

πŸ“ˆ Whatever happens #Ecommerce is benefiting from secular tailwinds in LATAM that are hard to stop
Just look at what happened with COVID 🦠 #Ecommerce exploded, a quick look at these graphs shows how $MELI went VERTICAL πŸš€

marketplacepulse.com/stats/mercadol…
GDP is set to grow at modest pace for most LATAM countries

πŸ“Œ Proj. GDP Growth 2021 in LATAM

πŸ‡§πŸ‡· 2.5% in base case scenario / 1.5% in down scenario

πŸ‡¦πŸ‡· 1.5% in base case scenario / 1% in down scenario

πŸ‡²πŸ‡½ 1.5% in base case scenario / 1% in down scenario
πŸ‡¨πŸ‡΄ 3.2% in base case scenario / 2.5% in down scenario
πŸ‘‡ The Bottom Line πŸ‘‡

🚚 $MELI is developing the logistics and payment solutions needed to overcome infrastructure hurdles

πŸ› It is by far leading LATAM in #Ecommerce sales and is coming with its own alternative to $SHOP πŸ’»
πŸ’²Currency risk is real while geopolitical 🌎 risk is mitigated by the secular growth of #ecommerce

πŸ“‘ With low internet penetration rates and low online sales as % of total sales πŸš€ Runaway for $MELI is huge
πŸ’Έ 50 PS is NOT CHEAP but this is a QUALITY business πŸ‘‰ Leader of #Ecommerce in a region of 635m inhabitants

πŸ‹οΈ Value doesn’t come cheap and $SHOP and $AMZN were not cheap back in 2010 or 2016
NEXT Wednesday for a deep dive into Mercado Pago πŸ’³ Mercado Envios 🚚 & more!

‼️ Please note that this is not a recommendation to buy - You are responsible for conducting your own research ‼️
Do not miss anything ✍️ Stay in the loop πŸ“©

βœ… For more content, follow us on Twitter

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Disclaimer - This is not investment advice in any form and investors are responsible for conducting their own research before investing.

Sources

βœ‘ Investor presentation

βœ‘ Company website

βœ‘ SimilarWeb
βœ‘ eMarketer

βœ‘ MarketPlacePulse

βœ‘ SPGlobal

βœ‘ Labsnews

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