MercadoLibre Earnings: Profitability Surprises Positively, Partially Offset by Currency Weakness

Driven by unexpected operating leverage over administrative costs, MercadoLibre posted a blowout quarter of profitability, with $12.61 in diluted EPS topping FactSet consensus estimates by 60%—and more than doubling our $5.74 estimate, which reflected an expectation for outsize credit card growth and commensurate provisioning for expected credit losses. While the market reaction was overwhelmingly positive, we adopt a more measured view, with currency headwinds representing a potent drag that's likely to persist into 2025. Further, we saw nothing in the results that suggests that a revision to our long-term assumptions for high-teens operating margins is warranted. As we balance a very strong quarter, currency headwinds, and time value, we plan to raise our $1,750 fair value estimate by a mid-single-digit percentage.