MercadoLibre (MELI) Looks to Ship Growth Noche a la Manana

MercadoLibre (NASDAQ: MELI) shares are trading at 67x FY09 EPS estimates, and that, say Barron's, makes them a little too overbought.

MercadoLibre is the Latin America version of eBay. It has acquired marketplaces in 12 Latin American markets, and is a market leader in countries such as Brazil, Mexico, and Argentina. The company is looking to break into search capabilities and offer its own payment system, lovingly dubbed MercadoPago.

Mercado's stock price has risen virtually exponentially over the past several months, rising from $16 to $50 YTD, and is currently at $48.70. As a comparison, Ford Motor (NYSE: F) has also had a pretty tremendous escalation, from as low as $1.58 in 2009, to $9.48 currently. However, the valuation is different, and Ford looks to trade at only 19.75x the Street FY10 EPS consensus, whereas Mercado is still up there at 45x FY10 EPS consensus.

Mercado still is attractive, though, considering the economy that they're in. Latin America has less than 30% of the population that is using the internet, a number that is growing by 32 per year since 2000. By comparison, the U.S. has about 74% of the population online. Both of these bits of information were begotten from InternetWorldStats.com. Even though e-commerce in the U.S. makes up about 2% of GDP, in Latin America that number is 10x less, to 0.2%.

A big risk to MELI is the appreciation of the U.S. dollar. Because of the recent drop in the value of the dollar, MercadoLibre's profits bolted up as currencies like the Brazilian real became stronger, comparatively.

Another risk could come sooner than later. Investors may sell off in January in hopes to defer the tax until April 2011. As is the case in many rapid-growth companies, once the stock skyrockets, the reentry can be unbridled. Think of the tech stocks of 1999 - 2001.

In either case, MercadoLibre investors ask, "would you like papel o plastico?"

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