Mission “Our main focus is to serve people in Latin America by enabling wider access to retail, digital payments and e-commerce services, and by providing compelling technology-based solutions that democratize commerce and money” Business Overview Mercado Libre is an Argentine company headquartered in Montevideo since a few years ago. It was founded in 1999 by Marcos Galperín and Hernán Kazah, alongside a group of entrepreneurs. Mercado Libre firstly was an auction marketplace, as eBay, to then migrate it’s functionality to an authentic marketplace.
Excellent writeup Giuliano! I have looked at this company in the past, but my knowledge of S. America has always pulled me away from putting money there. A few questions:
1. Thoughts on margin compression? Is this more a product of continued expansion (like Alibaba) that is causing them to spend elsewhere to continue growing?
2. What is your TAM for their business? Or should I say, can they continue growing at current rate for the next 5-10 years?
Thank you very much my friend! haha South America is definitely frightening, I think I'd do the same as you in another world.
1. Margin compression was the result of an abrupt increase in costs. I believe margins should tend to expand as the decade progresses. I'm looking forward to hearing management on guidance regarding the subject.
2. Their actual TAM gets quite blurry as they enter more markets, but the fact of leading Latin America in E-commerce and Digital Payments should allow it to capture a lot of regional industry growth. I believe growth rate could be around a 25% CAGR for the next 5 years.
Thanks for the reply my friend. Yea I figured there was a rational reason for their margins going down other than "competition is eating away at profits". They seem to have an incredible moat, which I admire very much. I also liked your point on how long management has been around and the founder is still there. I know what you mean about the blurry TAM's. Companies that are essentially conglomerate/spawners definitely muddle the waters as they have multiple new markets to draw profits from. I like how they have added more and more areas to support their users. One other question, are they more like Amazon or Alibaba? As in, do they own and store the physical inventory, or just take care of platform/payments/logistics/etc, on behalf of sellers?
That´s exactly what I meant, in both points. As of today, Mercado Libre mainly takes care of customer's needs, but it does not produce in-house products (or at least at a large scale) nor does it store physical goods.
Mercado Libre's historical thesis has been around covering and solving this pain points on E-commerce users (both buyers and sellers). I believe that if further innovates or spins in business model, it should continue to be around this main idea.
Excellent writeup Giuliano! I have looked at this company in the past, but my knowledge of S. America has always pulled me away from putting money there. A few questions:
1. Thoughts on margin compression? Is this more a product of continued expansion (like Alibaba) that is causing them to spend elsewhere to continue growing?
2. What is your TAM for their business? Or should I say, can they continue growing at current rate for the next 5-10 years?
Thank you very much my friend! haha South America is definitely frightening, I think I'd do the same as you in another world.
1. Margin compression was the result of an abrupt increase in costs. I believe margins should tend to expand as the decade progresses. I'm looking forward to hearing management on guidance regarding the subject.
2. Their actual TAM gets quite blurry as they enter more markets, but the fact of leading Latin America in E-commerce and Digital Payments should allow it to capture a lot of regional industry growth. I believe growth rate could be around a 25% CAGR for the next 5 years.
Thanks for the reply my friend. Yea I figured there was a rational reason for their margins going down other than "competition is eating away at profits". They seem to have an incredible moat, which I admire very much. I also liked your point on how long management has been around and the founder is still there. I know what you mean about the blurry TAM's. Companies that are essentially conglomerate/spawners definitely muddle the waters as they have multiple new markets to draw profits from. I like how they have added more and more areas to support their users. One other question, are they more like Amazon or Alibaba? As in, do they own and store the physical inventory, or just take care of platform/payments/logistics/etc, on behalf of sellers?
That´s exactly what I meant, in both points. As of today, Mercado Libre mainly takes care of customer's needs, but it does not produce in-house products (or at least at a large scale) nor does it store physical goods.
Mercado Libre's historical thesis has been around covering and solving this pain points on E-commerce users (both buyers and sellers). I believe that if further innovates or spins in business model, it should continue to be around this main idea.