MercadoLibre Tumbles After Net Income Miss on Spending Boost

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Shares of Mercado Libre having their biggest intra day drop since twenty twenty four, down about fourteen percent intra day after fourth quarter net income missed analyst estimates as the company continue to invest heavily in its main business lines. Now I should point out ALIS are broadly positive on the growth trends of the company. They did note that

Thank you Carol Patty for having me. It's a pleasure seeing you again.

And as we mentioned yesterday on earnings report, we are very excited about the growth that we are delivering in all of our businesses. You mentioned under atalising that has been held by a ring at seventy percent year and year. Our ecommerce business in particularly in BRAZILA and Mexico growing thirty five percent year and a year and growing market share. The same thing with Marco Pao, our fintech platform, which is also growing very rapidly in a region where financial

Well, you have a great view of the consumer given where you sell and and what you sell. If you were to characterize consumers differently in different parts of the market, different parts of the world that you sell in, how would you characterize the consumer?

I think if you compare the consumer behavior in Latin America relative to more developed countries. I think we're behind in terms of adoption of e commerce, and this represents an opportunity to US commerce. Preduccial ecommerce is only fifteen percent in Latin America, is half the penetration, and then

So I think those are the main difference.

At the end of the day, we sell everything in mercalliure what we're doing is we're trying to move people online and create the market.

So your sales did be fourth quarter expectations. We were just talking about some of the numbers with you. Forty five percent year on year increase in that revenue eight point eight billion, driven by customers taking advantage of free shipping perks and credit offerings. I am curious about these momentum drivers, whether they continue, and I'm really interested about the credit offerings. Does it show Martin strength of the consumer or a consumer who needs to be buying more on credit?

Yeah, let me first talk about the growth or portunity that you mentioned. We deliver forty five percent year on year growth, but this is the twenty eight consecutive quarter in which we deliver more than thirty percent near on year growth in terms of revenue. So growth has been consistent and when we look ahead of us, because of a large opportunity that we see in Latin America, it will continue to be there and this is the reason

More on marcalo eure.

So it is very snartistic, but at the end of the day, we're doing so doing financial inclusion and we have the objective of becoming the largest digital banking of the America and we're working towards that.

Martin, you mentioned when we were just a few moments ago, the penetration in Latin America of e commerce and how it's it's half of what it is here in the United States. So there's a lot of opportunity, there's a lot of runway for your company. What's a good way to think about the progression over the next few years, like how does that increase one year, three year, five years from now. What's a good goal for investors to have an understanding of.

I think a couple of way of looking at it.

I think the penetration of e commerce, there's no reason why you shouldn't reach the levels of China north of thirty percent.

So that's double differendition that we have today.

Also, if you look at a number of buyers, we have one hundred and twenty million buyers in our platform in a reagion of six hundred million.

Of course, where we're going at twenty six for ten year a year of the number of users.

As we continue investing and improving the user experience, that should continue to deliver growth. So we see plenty of wrong way for growth ahead of us in commerce, and the same thing could be said about fintech.

But when like if you were to give a timeline for when that would happen, when with different Latin American markets read reach what China has experienced.

I think it's a male it's hard to put the timeline.

I mean, we've seen a lot of accelerations since pandemic in terms of phanitudgenal e commerce.

I meanf we continue on trend, I think we.

Should be able to get to the levels where China or the US are today maybe five to seven years.

Then we should continue to increase that traugtional we're going forward.

Hey, one of the things I want to go back to, and I think you touched on this, but it's part of why we're seeing a negative stock reaction, and that is the substantial investments that you guys are making in e commerce in the fintech unit. And will say that it's necessary. You got to make these investments in order to bring about future growth. So on that because investors are questioning it, certainly in the trade today, Martine, how should we think about the run rate here?

Yeah, let me give you an example to we be more tangible what we're doing right. We knowwer our free shipping threshold in Brazil and that was not the first time that we did within it several times since twenty seventeen, and that's a way to enable more people to come online. You know, shipping costs is one of the main frictions for people to come online. So when we did that, we did put pressure on margins in the short term,

So we think again when.

We try, we try to optimiate long term margins as opposed to short term margins. And we're very confident that the investments that we're doing in commerce in this case will help achieve that goal.

But will it'll be a drag on margins for a couple more quarters, Like do you have a good feel on how that how long that continues to be maybe an issue because obviously investors see it as an issue today.

Yeah, of course, I have been consistent to the market saying that our main objective is to capture the large opportunity ahead of us, and we will not hesitate to invest to capture our opportunity. We have a long chart reference for investment with cautious and very prudently and we are expecting returns on those investments.

But in the long term.

So if we see more opportunities to invest in one P cross border trade, expanding the free shipping offering, the credit card, we will continue to do so because we think it's the right way to go in terms of expanding and maintaining a leadership position in both commerce and fintech.

Well, on that marketing expenses they rise when you trying to increase demand. If you think about churn or like if you reach a new customer, the cost of acquisition of that customer, how long does that customer stick around after using the service, and how do you make sure that you don't have to keep spending to entice them to come in.

That's a great question.

This particular quarter last year, actually we increase the level of investment in advertising and the course that we incorporated in twenty twenty five perform a lot better than the previous cohorts because they come and they find an ecosystem that works better, that has more free shipping, better financing, alternatives, assortments.

I don't know if this is a crazy question, but we just want to I want to ask you before we run talked about this.

You talked about this earlier on the call today.

Well, what's been going on in Mexico and you know, the taking out of the cartel chief and what I guess you know, we kind of continue to.

Watch this disruptions at airports.

Exactly is any of that are you seeing that show up in any way in terms of consumers from Mexico?

Well, obviously, we are monitoring the situation very closely to make sure that our employees and our customers and farmers are safe. Even the recent events, we have not seen any disturbance on events. But we're marketing the situation and close contact with authorities to make sure that we'll get into disruption.

All right, We're going to leave it on that note, so great appreciate that you addressed that as well. Martine, thank you so much, really appreciate the time today. Martin de los Santos. He is the chief financial officer of the e commerce firm and Latin America's most valuable company.