MercadoLibre Beats Revenue Forecast, But Net Profit Falls Short
MercadoLibre, the leading e-commerce platform in Latin America, recently reported its financial performance for the third quarter of 2023. While the company exceeded revenue expectations, its net profit fell short, primarily due to adverse currency effects and decreased demand in Argentina.
Financial Highlights for Q3 2023
For the July-September quarter, MercadoLibre posted a net income of $421 million. This figure represents a 6% increase compared to the same period last year, but it missed analysts’ expectations, which had forecasted $481 million.
Revenue and Growth
The total revenue for the company reached $7.4 billion, marking a significant 39% growth year-over-year. This exceeded analysts’ predictions of $7.2 billion. The growth in revenue was bolstered by a 35% rise in Gross Merchandise Value (GMV) on a currency-neutral basis.
- Net Income: $421 million
- Expected Net Profit: $481 million
- Total Revenue: $7.4 billion
- Expected Revenue: $7.2 billion
- GMV Growth: 35%
Operational Insights
MercadoLibre’s Chief Financial Officer, Martin de los Santos, highlighted that investments made in Brazil have begun to show positive returns. In June, the company lowered its free-shipping threshold in Brazil, which stimulated a notable 34% increase in GMV there. This adjustment also resulted in the fastest growth of unique buyers since early 2021. However, this strategy has been detrimental to profit margins, with operational margins dropping to 9.8%, the lowest since Q4 2022.
Further contributing factors to the profit margin decline include slowing sales in Argentina due to heightened economic instability. Fortunately, the firm’s operations in Mexico have been beneficial for margins.
Impact of Currency and Tax Changes
MercadoLibre’s net profit was also adversely affected by the devaluation of the Argentine peso and an increase in the tax rate in Argentina. The company continues to emphasize the importance of seizing growth opportunities, even if such endeavors impose short-term margin pressures.
Fintech Performance
The fintech arm, Mercado Pago, reported impressive growth as well. Its loan portfolio surged by 83% year-over-year, reaching $11 billion. The delinquency rate for loans aged 15 to 90 days decreased from 7.8% to 6.8%. Additionally, the total payment volume from Mercado Pago’s acquiring operations rose 32% to $47.7 billion.
- Loan Book: $11 billion
- Year-over-Year Growth: 83%
- Delinquency Rate: 6.8%
- Total Payment Volume: $47.7 billion
In conclusion, while MercadoLibre achieved a revenue beat in Q3 2023, the challenges in net profit highlight the volatility in the current economic landscape. Investors and stakeholders remain watchful of the company’s strategic moves in both its e-commerce and fintech operations moving forward.
