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Mercadolibre Inc (MELI), Amazon.com, Inc. (AMZN): Getting It Wrong, This Stock Is a Winner

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Smart Investing is a constant education. There is a need to be able to step back and look at the Big Picture to gauge the winds of the market. To look at yourself and the goals you set with consistency in good performance are the most important. Then there are the stocks you put your hard earned money into: knowing when it’s the time to buy, and when it’s the time to say goodbye.

However, some days you just get it wrong.

Mercadolibre Inc (NASDAQ:MELI) was one of these stocks. The provider of e-commerce platforms in Latin America first featured in May 2012, just prior to its then earnings. At that time, the stock was trading at $92.86, having eased back from a $100 high. The company just missed estimates, but was hurt more by (then) reports of Amazon.com, Inc. (NASDAQ:AMZN) releasing a dedicated site in Brazil. Not surprisingly, the naysayers moved in — along with the usual belated analyst downgrade — which sent the stock stumbling down over 30% from its 2012 high.

In November, despite fulfilling earnings expectations and delivering 25% growth in year-on-year registrations, I grew skeptical on the lack of reaction to the news. I was concerned a possible ‘hidden’ story (an issue of increased fraud was raised by an analyst in Q3 2012 earnings call) was keeping the stock back. However, this story, ultimately didn’t emerge.

Ultimately, Amazon.com, Inc. (NASDAQ:AMZN) did launch in Brazil in December 2012, bringing with it a Brazilian Kindle store.
But Amazon’s launch didn’t trigger a price rout for Mercadolibre Inc (NASDAQ:MELI). In fact, for Amazon’s most recent earnings conference call, the company said nothing about its Brazilian operations. The only comment made was in response to an analyst’s question on its Brazilian performance, stating “we are in the right geographies right now.” The launch of Amazon.com, Inc. (NASDAQ:AMZN)’s Brazilian operations seemed to take the uncertainty out of Mercadolibre Inc (NASDAQ:MELI); since Amazon’s launch, MercadoLibre has gone from $70 to around $120 over the course of six months.

Amazon’s challenge is typical of one faced by its competitors: it was the small fish coming into the pond owned by the big fish, MercadoLibre. Amazon.com, Inc. (NASDAQ:AMZN) runs a distant second to Mercadolibre Inc (NASDAQ:MELI) in Brazil. yStats.com released a report in December 2012 which stated that MercadoLibre was the “leading B2C E-Commerce Player in Brazil“, and Brazil generated the highest B2C e-commerce revenue in all of Latin America, with one third of all Internet users in Brazil having bought something online.

Mercadolibre Inc (NASDAQ:MELI)’s more recent earnings continued the good growth story: for Q1, there was an additional 23% growth in registered users (4.2 million new users). Payment transactions grew 38% with $1.6 billion of merchandise traded on the site. Total payment volume grew 62% (in local currency). With 3% of commerce in Latin America conducted online, the growth prospects for MercadoLibre remain very favorable.

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