Why Mercadolibre Inc (NASDAQ: MELI) stock is declining

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Mercadolibre Inc (NASDAQ: MELI) stock lost over 1.9% on 11th Feb, 2020 (as of 10:19 am GMT-5 ; Source: Google finance)  after the company posted mixed results for the fourth quarter of FY 19. The company has reported a loss of almost $54 million compared to a loss of $2.3 million, the year prior. Operating expense rose 84% to $377.2 million, as the company ramped up its spending on marketing and related costs. During the fourth quarter, the company had reached almost 8 million active payers and 2.4 million active collectors, which represents a growth in users of 29.4% in the payers metric QoQ and 51.6% in the collectors metric also QoQ on a consolidated basis. The company has achieved 44.2 million unique buyers, 11.2 million unique sellers, 71.1 million unique payers, 15 million unique collectors, and delivering Net Promoter Scores that improved by 3 percentage points year-on-year in commerce and by 7.3 in payments.

Moreover, on a consolidated basis, FX neutral total payment volume continued to grow during the fourth quarter to 98.5% year-on-year growth, while it also increased in all the main geographies. This was mostly due to off-platform services, which accounted for 78% of total TPV growth. On-platform total payment volume in Argentina and Mexico also posted growth on a sequential basis, reaching 107.6% and 53.4% year-on-year growth on an FX neutral basis respectively, which led to total on platform payment volume growth of 46% on an FX neutral basis. Off marketplace total payment volume forms 54.7% of total TPV during the fourth quarter, and continued to increase in triple digits on a consolidated basis, reaching FX neutral growth of 175.8% year-on-year.

MELI in the fourth quarter of FY 19 has reported the adjusted loss per share of $1.11, missing the analysts’ estimates for the adjusted loss per share of 74 cents, according to analysts polled by FactSet. The company had reported the adjusted revenue growth of 57.5 percent to $674.3 million in the fourth quarter of FY 19, beating the analysts’ estimates for revenue of $667 million. The company posted the gross profit of $308.3 million, which represented 45.7% of revenues during the quarter, was down from 47.8% a year ago. This 211 basis point margin compression was mainly due to the most part by warehousing costs from the fulfillment operations and the incremental inventory costs from the robust sales of MPOS devices, which were partially offset by collection fee improvements, sales taxes and hosting fee efficiencies.

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