Bearish stock to watch: Mercadolibre Inc (NASDAQ: MELI) stock

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Mercadolibre Inc (NASDAQ: MELI) stock lost over 5% on 1st November, 2019 (As of 1:34 pm GMT-4; Source Google finance) after the company delivered lower than expected results for the third quarter of FY 19. The company reported the Net loss of $146.1 million due to the increased investment in marketing and also a valuation allowance on deferred tax assets in Mexico and Colombia which accounted for $91.5 million and $7.2 million, respectively. The company posted loss from operations of $81.9 million, compared to a loss of $11 million during the third quarter of 2018. As a percentage of revenues, the loss from operations was of 13.6%.

Moreover, total payment volume (TPV) through Mercado Pago rose to 66.2% in USD and 94.5% on an FX neutral basis $7.6 billion, a year-over-year. Total payment transactions rose 118.5% year-over-year, which led to aggregate of 227 million transactions for the third quarter. Mercado Pago has reported successful execution in off-platform payments (online and offline) through merchant services, mobile point-of-sale (MPOS) devices and its mobile wallet business. On a consolidated basis, off-platform TPV increased 140.4% year-over-year in USD and 189.6% on an FX neutral basis. For the first time ever, the company’s quarterly off-platform TPV has crossed on-platform TPV, reaching almost $4 billion in transactions and 158.3 million payments. Gross merchandise volume (GMV) grew again crossing the $3 billion mark and reached $3.6 billion, which reflects a 21.6% and 36.8% risse in USD and on an FX neutral basis, respectively. Mobile gross merchandise volume grew 32.4% year-over-year on an FX neutral basis and reached 65.4% of GMV. The items shipped through Mercado Envios grew 47.5% to 81.2 million year-over-year increase, due to optimizations in the free shipping program. Further, transactions per unique active device continue to increase as usage grows in both Brazil Argentina as well as in Mexico.

MELI in the third quarter of FY 19 has reported the adjusted loss per share of $0.97, missing the analysts’ estimates for the adjusted earnings per share of 1 cents, according to Zacks Consensus Estimate. The company had reported the adjusted revenue growth of 69.7 percent to $603.03 million in the third quarter of FY 19, missing the analysts’ estimates for revenue by 0.31%.

Additionally, Interest income rose 229.5% to $28.5 million, year-over-year, on the back of the proceeds of the 2028 Convertible Notes and equity offering in 2019, which led to more invested volume and interest gain, and higher float in Brazil and Argentina. The Company has incurred $14.5 million in financial expenses in the second quarter, mainly due to interest expense related to the 2028 Convertible Notes and financial guarantees in Argentina.

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