MELI has increased by 236% compared to the previous year
MercadoLibre, Inc. (NASDAQ: MELI) is an Argentina-based company based in the United States that operates online e-commerce marketplaces and online auctions. The company is home to the largest online trading and payments ecosystem in Latin America and is often referred to as “Latin America’s Amazon.com (AMZN)”. MercadoLibre is present in 18 countries including Argentina, Brazil, Mexico, Spain, Panama, Colombia, Chile and many others.
Similar to AMZN, it was a meteoric rise for MELI. The stock hit a record high of $ 2,020 on Jan. 21, up 236% year over year. This is the good, now the bad; The shares have been under pressure since the beginning of the year. This deficit was exacerbated by a bear gap after winning earlier in the month. The silver lining is MELI’s 200-day moving average, which has risen in support and hasn’t closed in almost a year.
MercadoLibre shows investors a promising growth rate. MELI has almost tripled its sales since the 2017 financial year and achieved sales of almost 1.7 billion US dollars (73% growth) in the 2020 financial year. In addition, the company’s net income continues to approach profitability. In 2020, MercadoLibre had net losses of less than $ 1 million, more than $ 170 million more than in fiscal year 2019. In addition, MELI is in a great position to continue funding the expansion. The company’s balance sheet contains $ 2.46 billion in cash and only $ 1.71 billion in debt.
The biggest red flag for investors considering MercadoLibre stocks for their portfolios, like most other high-growth tech stocks, is current valuation. MELI’s market capitalization is currently over $ 73 billion, and MercadoLibre shares have a price-to-earnings ratio of 250. The best approach to buying MELI stock is to buy the decline whenever possible, making the recent slump a great potential opportunity for investors willing to take the risk of its massive valuation.
Taking the risk of options might be a viable strategy. The Schaeffer’s volatility index (SVI) of 43% is higher than just 10% of all other values in its annual range, which means that option players are currently pricing in relatively low volatility expectations. In addition, security is Schaeffer’s Volatility Scorecard (SVS) is 100 (out of 100), which means that MELI exceeded these volatility expectations over the past year.