MercadoLibre (MELI), the Latin American e-commerce giant, saw its stock plummet 5.46% in pre-market trading following the release of its second-quarter financial results. The significant drop came as the company reported mixed results, with earnings falling short of analyst expectations despite robust revenue growth.
For the second quarter, MercadoLibre reported net income of $523 million, down 1.5% year-over-year and significantly below the analyst consensus estimate of $596 million. However, the company's revenue surged 34% to $6.8 billion, surpassing analyst projections of around $6.7 billion. The earnings miss was primarily attributed to "growth investments" such as free shipping and seller discounts in Brazil, which compressed profit margins.
Chief Financial Officer Martin de los Santos acknowledged the impact on margins but remained optimistic about long-term prospects. "We don't want to miss the growth opportunities ahead of us," he stated. "That might generate some short-term margin pressure, but we are very optimistic about the long-term trajectory of our profitability." Notable areas of growth included a 31% increase in items sold, the fastest pace since mid-2021, and a 91% growth in Mercado Pago's credit portfolio. However, the EBIT margin declined to 12.2% from 14.3% a year earlier, reflecting the cost of these growth initiatives.
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