As Markets Change, Mercado Libre Share Price Drop Shows No Company Is Safe – TechCrunch

Investors’ apparent concerns about the devaluation of $MELI may affect Latin American startups

Retracted reviews of major tech companies, including a batch of initial public offerings, in part due to lackluster guidance. As we saw this morning with Upstart, mentoring can trump post-production when it comes to determining investor sentiment about any given company.

For one company currently in the general market penalty box, it’s hard to parse the picture. Mercado Libre ($MELI), after reporting earnings last week, saw a sharp drop in its value. On May 4, Mercado Libre closed at $1023.21 per share. On May 5, the day it announced its first-quarter performance, the company’s stock closed at $913.22 per share. Yesterday, the company’s stock fell to close at just $770.99.

The exchange explores emerging companies, markets and money.

Read it every morning on TechCrunch+ or get the newsletter from The Exchange every Saturday.

and that after, after Mercado Libre reported greater-than-expected revenue growth for the first quarter of 2022. Why drop in value if the company’s recent results aren’t so bad? Mercado Lieber’s comments about the market indicate that it is facing challenging conditions stemming from a number of sources, including consumer spending, rising interest rates, foreign exchange pressures and inflation.

Mercado Libre, a Latin American e-commerce and financial technology company, went public in 2007, making it an older public company. But its findings offer a fascinating insight into the digital commerce and financial technology industries in a wealth of Latin American countries, which makes their findings and investor response so important.

How is that? The exchange has tracked Latin American startup activity and venture capital for some time. The numbers were staggering. So how their underlying market is performing is an important data point; If the region’s tech market is in decline, it could slow the growth of a host of startups and billions of dollars in invested capital.

What can we learn next from the Mercado Libre earnings report and the ensuing drop in valuation? It is not a simple question. Let’s explore.

Mercado Libre results for the first quarter of 2022

In the first quarter of 2022, Mercado Libre reported net revenue of $2.25 billion, a 63% increase over last year’s results of $1.38 billion. The company’s gross profit was $1 billion, allowing Mercado Libre to generate $139 million in operating profit and $65 million in net income. Each number was an improvement from last year’s results.

Rapid growth and increased profitability are not a bad combination of results. So, how did the Mercado Libre perform compared to expectations? Better in terms of revenue, Street expects only $2.01 billion in profits. However, when it comes to earnings per share, the company’s earnings were $1.30 down from $1.66 per share.

Sticking with the good news for now, Mercado’s fintech net revenue has expanded from $467 million in the first quarter of 2021 and $773 million in the fourth quarter of 2021 to $971 million in the first quarter of this year. The price of fintech products also rose, while total payment volume rose 81% year-over-year (FX neutral) to $25.3 billion, with transactions up 73% to 1.1 billion, again compared to the year-ago quarter.

It’s a powerful set of results, isn’t it? So let’s flip the coin and look at the problems that can cause Mercado Libre’s share price to drop, and the problems it can cause for startups in Latin America.