MercadoLibre's (MELI) EPS Could Grow 42% in 2017, Says JPMorgan; Rating Raised to 'Overweight'
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(Updated - September 2, 2016 11:07 AM EDT)
JPMorgan upgraded MercadoLibre (NASDAQ: MELI) from Neutral to Overweight with a price target of $200 (prior $133). Despite rich valuation, the Brazilian marketplace is thriving, said analyst Andre Baggio, and he thinks share price will be driven higher by strong EPS growth.
The analyst explained, "Revenues are growing atthe highest levels reported since the company went public in 2007, even though they are 10x larger now, demonstrating the potential of e-commerce, still only ~4% of total retail sales. MELI is reaping the benefits of its enhanced marketplace which combines payments and shipping, with buyer experience improving and leading to higher activity. We expect an impressive revs growth level of 46% in 2017E."
"MELI is gaining share among Brazilian marketplaces," continued the analyst. "Considering its two largest competitors, MELI’s share of marketplace GMV increased 4pp since 4Q15, reaching 80% in 2Q16."
Baggio added, "We see EPS’17E up 42% y/y, which is 19% ahead of consensus, as operations post strong 51% growth in localcurrencies and the FX scenario is more benign in Brazil, with the avg BRL depreciating ~1%, after losing nearly half of its value during the previous five years. We are increasing our revs’17E by 16% (+10% on local currency growth / +6% on FX) and EPS ’17E by 18%, reaching $4.16/shr, ahead ofconsensus medianat $3.50."
Shares of MercadoLibre closed at $173.68 yesterday.
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