Ia recent episode of The rank, three of our top contributors have revealed their most compelling stock ideas for 2022. And not only Fool.com contributor Danny Vena called MercadoLibre (NASDAQ: MELI) one of his best ideas, but co-workers Matt Frankel and Jason Hall both ranked it number one among all actions discussed on the show. In this extract, recorded on January 10, the trio explain why they think MercadoLibre might be heating up.
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Matt Frankel: Danny, why don’t you tell us about MercadoLibre, why you saw it so early in the cycle, and why you love it for 2022?
Danny Vena: To be honest, the reason I was really sold on MercadoLibre over a decade ago is if you look at the trends the company is following, the two biggest e-commerce and payments. It was a company that had a head start. They were the first and probably the main major e-commerce platform in Latin America.
They added a payments segment shortly after their IPO. Latin America is a place where many people still do business in cash. You’d be surprised as something like half of the transactions in the region are still done in cash. It’s a place where more than 50% of people in Latin America don’t have a credit or debit card and therefore payments were a big deal for them and a reason why e-commerce doesn’t was not adopted early.
The fact that they had this payment method where people could go to their local convenience store, similar to 7-Elevens that you would see here, and say, I want to put this money in my account, and they put money in their Mercado Pago account that has ensured that customers can truly join the e-commerce revolution. It was the story of a company that made all the right choices from the start. The reason I’m still really sold on MercadoLibre is because if you look at their last quarter, revenue was up 73% year over year.
Their payout growth was very high and what is driving the payout growth now is the fact that they have gone beyond just a payment method for their platform. Their payouts have now moved to other websites and other physical stores, and so their payouts are growing very quickly. It’s such an early story. Latin America has twice the population of the United States. Basically, I see all of these things converging to form a once-in-a-generation opportunity. So far, MercadoLibre is one of my best performing stocks of all time. I still see MercadoLibre increasing its multiples from here.
Frankel: I love MercadoLibre. It was one of my first pandemic buys when the market crashed in March of last year just because I thought I had missed the boat and then boom I saw an opportunity to get in at a decent price . I’m starting to see that again now. I think he’s lost about 50% from the highs. MercadoLibre is, as you said, a great opportunity in this area. I like what they’re doing on the fintech side, because finance is my specialty. It is often called the Amazon (NASDAQ: AMZN) from Latin America.
Jason Hall: It’s so much more than that.
Frankel: It’s so much more, I’d call it the Amazon, the PayPal (NASDAQ: PYPL), the eBay (NASDAQ:EBAY) all in the early stages of the business cycle.
Vein: the Shopify (NYSE: SHOP).
Frankel: The Shopify and you can continue.
Vein: the Square [Block] (NYSE:SQ).
Frankel: So there’s a whole list.
Room: What is the big Chinese e-commerce company?
Frankel: Ali Baba (NYSE: BABA).
Room: I think it might be more appropriate to be honest with you. It’s just an amazing company. Yet you talk about where it is in the cycle. It’s a 23-year-old company, but Latin America is still single digit, mid-single digit, in terms of e-commerce penetration. It’s only just begun. I heard Marcos Galperin, the founder and CEO in an interview with actually I think the CEO of PayPal during the lockdown was doing this. I think he still does, but he said his mission was to make Latin America a cashless society. This tells you in one sentence where their attention is focused.
Last thing I want to say, data. We talked about Reached (NASDAQ: UPST) and so many of these other companies and data and where they are. I think people underappreciate how much data MercadoLibre has on its merchants, on its customers that can help it grow its lending business on both sides of that coin, can help us with the logistics, can the help add all this fintech stuff that he’s been doing, all the payouts since, I don’t think we’re giving them enough credit for how much data they have.
John Mackey, CEO of Whole Foods Market, an Amazon subsidiary, is a board member of The Motley Fool. Danny Vena owns Amazon, Block, Inc., MercadoLibre, PayPal Holdings, Shopify, and Upstart Holdings, Inc. and has the following options: Long January 2023 calls $1140 on Shopify, Long January 2023 calls $1160 on Shopify and long January 2024 $95 calls on PayPal funds. Jason Hall owns Block, Inc., MercadoLibre and Shopify. Matthew Frankel, CFP® owns Block, Inc. and MercadoLibre. The Motley Fool owns and recommends Amazon, Block, Inc., MercadoLibre, PayPal Holdings, Shopify, and Upstart Holdings, Inc. The Motley Fool endorses eBay and recommends the following: Long Jan 2022 $1,920 Amazon Calls, Long Jan 2022 75 $ calls on PayPal Holdings, long calls January 2023 at $1,140 on Shopify, short calls January 2022 at $1,940 on Amazon, short calls January 2022 at $82.50 on eBay, and short calls January 2023 at 1 $160 on Shopify. The Motley Fool has a disclosure policy.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.