MercadoLibre stock maintains Strong Buy rating at Raymond James despite margin miss

Published 05/08/2025, 18:02
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Investing.com - Raymond (NSE:RYMD) James has reiterated its Strong Buy rating on MercadoLibre (NASDAQ:MELI) with a price target of $2,750.00 despite the company reporting mixed second-quarter results. The $123 billion market cap company maintains strong analyst support, with InvestingPro data showing a consensus recommendation of 1.46 (Strong Buy).

The e-commerce giant exceeded expectations on key metrics with gross merchandise volume (GMV) reaching $15.3 billion, above analyst estimates of $15.0 billion, representing growth of over 35%. Total (EPA:TTEF) payment volume (TPV) also outperformed at $64.6 billion compared to expectations of $64.0 billion, growing more than 60%.

MercadoLibre missed on operating margins, however, coming in at 12.2%, approximately 90 basis points below expectations, which Raymond James suggests could lead to share price weakness following the stock’s strong year-to-date performance of 41% prior to earnings.

Raymond James highlighted several positive developments supporting its bullish stance, including improved credit underwriting with non-performing loans below 7%, accelerating Brazil GMV trends with June units up 34% year-over-year compared to 25% in the previous quarter, and robust advertising momentum growing 59% on a foreign exchange neutral basis.

The firm has slightly reduced its revenue projections due to lower commerce take rates from shipping fee reductions implemented in May and June, while trimming EBIT margin forecasts to 12.0% and 12.8% for 2025 and 2026, down from previous estimates of 13.0% and 13.9%, respectively.

In other recent news, MercadoLibre reported second-quarter revenues and EBIT that exceeded expectations from Cantor Fitzgerald, surpassing their estimates by 9% and 5% respectively. The company also saw a 37% year-over-year growth in gross merchandise volume, driven by strong geographical performance and changes to its shipping program. Despite these positive results, Benchmark noted mixed profitability metrics, though they maintained a Buy rating with a price target of $2,875. Meanwhile, Citi lowered its price target from $3,000 to $2,900 due to anticipated margin pressure, while still keeping a Buy rating. The margin concerns stem from investments in reduced shipping thresholds and promotional events in Brazil. Additionally, MercadoLibre’s board approved a new compensation plan for independent directors and a share repurchase program. On a positive note, S&P Global Ratings upgraded MercadoLibre to investment grade, highlighting the company’s robust operational and financial performance, particularly in Brazil, Mexico, and Chile. These developments reflect a period of strategic adjustments and growth for MercadoLibre.

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