Investing.com -- New Street Research raised MercadoLibre (NASDAQ:MELI) to Buy from Neutral, raising its price target to $2,300 from $2,000 per share in a note Thursday, citing a more favorable macroeconomic backdrop in Argentina and improving credit provisioning.
While the firm remains cautious on broader economic risks, it believes MercadoLibre is well positioned to "ride a favourable wave into 2025."
The analysts highlighted strong Q4 e-commerce trends, particularly a successful Cyber Monday event, as well as a significant expansion in private sector credit across Argentina.
"With very high E-Comm and Pago App usage, Mercadolibre is well set to ride this credit cycle," New Street wrote.
MercadoLibre faced a challenging third quarter, with issues in credit provisioning and net interest margins (NIMAL) weighing on performance. However, New Street noted that these concerns now "seem in check (and better understood)" while ongoing investments in logistics should contribute to improved efficiency and margins in Q4.
Despite a more positive near-term outlook, New Street acknowledged that macroeconomic risks remain a factor in Latin America. A downturn in the credit business could pose a revenue risk, but the analysts pointed out that such a scenario could also boost profitability, providing "a useful hedge for investors."
Overall, the firm sees significant upside for MercadoLibre, driven by strengthening e-commerce trends, increasing credit availability, and improving operational efficiency.
With these factors in play, New Street concluded, "we think Mercadolibre can at the least ride a favourable wave into 2025."