One of the world's largest e-commerce companies is becoming Wall Street's go-to company as investors look beyond the Big Seven for technology opportunities.
free marketis an Argentinian e-commerce and payments platform incorporated in Delaware and actively traded on Nasdaq. The platform's stock price will rise by 34% in 2024, compared with a gain of approximately 27% in 2024. Amazonand 20% S&P 500 Index. The company was founded 25 years ago by CEO Marcos Gaplerin at the height of the dot-com boom. It currently dominates online sales in Brazil, Argentina, Mexico, Chile and accounts for about half of online sales in South America, according to eMarketer. It also operates a digital payments platform called Mercado Pago.
About 90% of Wall Street analysts covering the stock rate it a “buy,” with an average price target of $2,268, about 8% higher than this week's trading price, according to FactSet. There is no sell rating.
Brad Gerstner of Altimeter Capital is one of them. He highlighted expanding margins and MercadoLibre's artificial intelligence potential as reasons he's “excited” about the stock.
“You look at companies like MercadoLibre … as (investors) get into the top seven, people have forgotten about a lot of companies – I think there will be a lot of Internet companies that benefit from artificial intelligence,” Gerstner said this month. told CNBC's Scott Wapner at the Goldman Sachs Communicopia conference. “It's not just margin expansion, it's a re-acceleration at the top where they can acquire customers, improve the product, make it easier for customers to buy and remove friction in the system.”
Silicon Valley to Buenos Aires
Galperin came up with the idea for MercadoLibre while a student at Stanford Business School in Palo Alto, California. When he started looking for seed funding, few investors were putting money outside of California.
“There is no venture capital in Latin America. In fact, there is no venture capital anywhere outside of Silicon Valley. Even if you are an entrepreneur in New York, the investors are on Sand Hill Road,” Galperin told CNBC, referring to the Wall Street of the West Coast. “I don't think they really care about exploring the rest of the world.”
The investor mentality has changed. Last year, Latin American venture capital-backed companies raised $3.3 billion across nearly 1,000 deals, according to PitchBook. At its peak in 2021, the region brought in $16.3 billion.
But back in the late 1990s, Galperin was pitching to a private equity investor who happened to lecture at Stanford University and saw Latin America's lack of infrastructure and competition as an opportunity.
“In Latin America, there is no existing infrastructure. You cannot make online payments. There is no efficient end-to-end commerce logistics, we have to build it ourselves,” Galperin said. “That made it more difficult in the beginning – but for us today, it was great.”
Although MercaroLibre is sometimes called the “Amazon of South America,” Galperin founded the company at a time when eBay dominated online commerce. At that time, Amazon was more like an online bookstore. In fact, MercadoLibre works with eBay, which bought a 20% stake in the company in 2001 and sold its stake in 2016.
“We learned a lot from that relationship, and eventually we started moving away from auctions,” Galperin said. “Today, I think we're closer to Amazon.”
Amazon is also beginning to see opportunities in South America. North America's dominant e-commerce platform has expanded into Mexico. “We've been competing since the beginning – and this will continue for many years,” Galperin said.
competitive advantage
He noted that favorable factors may help free markets fend off competition. E-commerce and online payments are growing steadily, and Latin America has a young, mobile-savvy population of more than 600 million. MercadoLibre's second-quarter revenue grew 42%, or 112% on a currency-neutral basis. Its operating profit margin expanded to 14.3%.
“If you look at e-commerce penetration in Latin America, it's still quite low compared to the U.S., Europe or Asia,” Galperin told CNBC. “About half of the population does not have a bank account or Underbanked. This is a huge opportunity for us to distribute financial products to all these people who have been historically excluded.”