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$MELI: The Digital Infrastructure of LatAm
MercadoLibre, Inc. ($MELI) is the largest e-commerce ecosystem in LatAm
It can also bring LatAm into the digital age
Its platform consists of 6 integrated verticals that will serve as the backbone of a modern LatAm economy
A thread
MercadoLibre, Inc. ($MELI) is the largest e-commerce ecosystem in LatAm
It can also bring LatAm into the digital age
Its platform consists of 6 integrated verticals that will serve as the backbone of a modern LatAm economy
A thread
1/ The Basics
6 integrated verticals:
- Mercado Libre (Marketplace)
- Mercado Pago (FinTech - includes lending)
- Mercado Envios (Logistics)
- Mercado Libre Advertising
- Mercado Libre Classifieds
- Mercado Shops (Online webstores)
The ecosystem benefits from network effects
6 integrated verticals:
- Mercado Libre (Marketplace)
- Mercado Pago (FinTech - includes lending)
- Mercado Envios (Logistics)
- Mercado Libre Advertising
- Mercado Libre Classifieds
- Mercado Shops (Online webstores)
The ecosystem benefits from network effects
2/ E-Commerce: $MELI IS the Market
MELI is the dominant leader in the top 5 countries in LatAm e-commerce market share (~86% of LatAm)
Transition from big-ticket to consumer goods (highly beneficial in recession)
Logistics enhances offering, reducing geographic frictions
MELI is the dominant leader in the top 5 countries in LatAm e-commerce market share (~86% of LatAm)
Transition from big-ticket to consumer goods (highly beneficial in recession)
Logistics enhances offering, reducing geographic frictions
3/ LatAm E-Commerce: LONG Runway
- Total LatAm Sales: $84B in 2020 and $116B by 2023 (12% CAGR).
Est. only 5.4% of total Retail sales (6.6% est. by 2022)
U.S. was 16.1% of total sales in Q2 2020.
LatAm is ~10 years behind US e-commerce usage; MELI will capture that growth
- Total LatAm Sales: $84B in 2020 and $116B by 2023 (12% CAGR).
Est. only 5.4% of total Retail sales (6.6% est. by 2022)
U.S. was 16.1% of total sales in Q2 2020.
LatAm is ~10 years behind US e-commerce usage; MELI will capture that growth
4/ More on E-Commerce
US: 254MM online buyers (77% of pop), 284MM internet users (86%)
LatAm: Only 38% of pop are online buyers
Two massive tailwinds: 1) Increase % of online buyers, 2) Increase % of internet users (even more online buyers)
MELI is capturing the opportunity
US: 254MM online buyers (77% of pop), 284MM internet users (86%)
LatAm: Only 38% of pop are online buyers
Two massive tailwinds: 1) Increase % of online buyers, 2) Increase % of internet users (even more online buyers)
MELI is capturing the opportunity
5/ Transforming LatAm Payments Landscape
MercadoPago enables merchants to accept digital payments in stores & online, both on & off MELI's marketplace.
For me, massive off market growth is critical - sticky product and network effects
Not as dominant as e-commerce biz... yet
MercadoPago enables merchants to accept digital payments in stores & online, both on & off MELI's marketplace.
For me, massive off market growth is critical - sticky product and network effects
Not as dominant as e-commerce biz... yet
6/ Nascent Payments Infrastructure
LatAm: Lowest ranked region in digital/mobile wallet penetration.
Only 2% of in-store spend & 14% of online spend - meaning, huge untapped market.
Trend is moving towards digitization (22% and 7% CAGR for ^ methods)
MELI: 52MM payers (+64%)
LatAm: Lowest ranked region in digital/mobile wallet penetration.
Only 2% of in-store spend & 14% of online spend - meaning, huge untapped market.
Trend is moving towards digitization (22% and 7% CAGR for ^ methods)
MELI: 52MM payers (+64%)
7/ Q2 Results
FX Neutral Commerce / FinTech / Net Revenue: $582MM (+149%) / $297MM (+86%) / $878MM (+123%)
GM: $427.2MM (48.6% Margin)
OpEx Margin: 37% (vs. 52%) - lower S&M (organic growth)
GMV: $5.04B (+101.5%)
TPV On / Off: $5.2B (+111%) / $6.1B (+175%) - $11.2B (+72.1%)
FX Neutral Commerce / FinTech / Net Revenue: $582MM (+149%) / $297MM (+86%) / $878MM (+123%)
GM: $427.2MM (48.6% Margin)
OpEx Margin: 37% (vs. 52%) - lower S&M (organic growth)
GMV: $5.04B (+101.5%)
TPV On / Off: $5.2B (+111%) / $6.1B (+175%) - $11.2B (+72.1%)
8/ Eye-Popping Operating Metrics
Unique Active Users: 51.5MM (+45%)
New Users: 16.9MM (+36.3%)
Items Sold: 178.5MM (+101.2%)
Items Shipped: 157.5MM (+124.4%)
Processed TRX: 405MM (+123%)
Mobile Wallet (MW): $2.1B (+373.2%)
MW Users: 9.5MM (+109.3%)
Unique Active Users: 51.5MM (+45%)
New Users: 16.9MM (+36.3%)
Items Sold: 178.5MM (+101.2%)
Items Shipped: 157.5MM (+124.4%)
Processed TRX: 405MM (+123%)
Mobile Wallet (MW): $2.1B (+373.2%)
MW Users: 9.5MM (+109.3%)
9/ Investment in Growth
EBITDA Margins have declined from 33.6% in 2014 to 0% TTM (13.9% in Q2)
Direct result of:
1) Higher S&M Margin (20.1% to 32.5%)
2) Higher COGS (25.5% to 44.8%) - shipping costs
Logistics and S&M investments paying off: 38.3% Rev CAGR (FY 2015 - TTM)
EBITDA Margins have declined from 33.6% in 2014 to 0% TTM (13.9% in Q2)
Direct result of:
1) Higher S&M Margin (20.1% to 32.5%)
2) Higher COGS (25.5% to 44.8%) - shipping costs
Logistics and S&M investments paying off: 38.3% Rev CAGR (FY 2015 - TTM)
10/ Risks
1) Execution Risk: Hard to scale market the size of LatAm and with different systems / cultures.
2) Political and FX Risk
3) Valuation: High multiples relative to $AMZN $BABA $EBAY $PYPL
4) Dilution: 2019 Equity offering of +4MM shares (potential for more?)
1) Execution Risk: Hard to scale market the size of LatAm and with different systems / cultures.
2) Political and FX Risk
3) Valuation: High multiples relative to $AMZN $BABA $EBAY $PYPL
4) Dilution: 2019 Equity offering of +4MM shares (potential for more?)
11/ Conclusion
A thread can't fully encapsulate how $MELI's platform will modernize LatAm's e-commerce & payments infrastructure.
Risks remain near term including valuation.
However, in 5-10 years it'll be clear that it is the $BABA or $AMZN of LatAm
I don't hold a position.
A thread can't fully encapsulate how $MELI's platform will modernize LatAm's e-commerce & payments infrastructure.
Risks remain near term including valuation.
However, in 5-10 years it'll be clear that it is the $BABA or $AMZN of LatAm
I don't hold a position.
For additional investment insights, you can check out:
Past Twitter Threads: https://twitter.com/SeifelCapital/status/1292869520835715074?s=20
My Newsletter (please subscribe if you like the content): https://seifelcapital.substack.com/
Or Detailed Reports: https://drive.google.com/drive/folders/1q7RvhoNK_3AzYnk3B5udtBBjwoSg6GOR?usp=sharing
Stay tuned for another thread next Tuesday!
Past Twitter Threads: https://twitter.com/SeifelCapital/status/1292869520835715074?s=20
My Newsletter (please subscribe if you like the content): https://seifelcapital.substack.com/
Or Detailed Reports: https://drive.google.com/drive/folders/1q7RvhoNK_3AzYnk3B5udtBBjwoSg6GOR?usp=sharing
Stay tuned for another thread next Tuesday!
