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Will the WhatsApp partnership increase MercadoLibre’s profits?

Will the WhatsApp partnership increase MercadoLibres' earnings?

E-commerce specialist in Latin America MercadoLibre Inc. (NASDAQ: MELI) the downward trend did not occur until 2022, and the new partnership could increase the value of the stock.

Earlier this month, the Argentine company’s chief financial officer told Reuters that MercadoLibre would start processing business payments for WhatsApp users.

WhatsApp owned by Meta Platforms Inc. (NASDAQ: META), offers free messaging capabilities across multiple platforms. It is not well known in the US, but is popular around the world among family members, friends and business partners living in different countries.

While users have long had access to features such as text messaging and voice and video calling, a new feature would be payment processing.

MercadoLibre Chief Financial Officer Pedro Arnt told Reuters that the two companies were testing payment processing in Brazil. “This could be an opportunity for us to effectively use WhatsApp to generate more sales and better customer contacts,” Arnt said.

“Hassle-Free Transaction”

IN entry on the company blogWhatsApp commented on the Brazilian initiative, saying: “Ultimately, we want people to be able to make secure payments directly in chat using a credit or debit card. We recently launched this solution in India and are looking forward to testing it in Brazil with multiple payment partners. This seamless checkout will be a game-changer for people and businesses who want to buy and sell on WhatsApp without having to visit a website, open another app or pay in person.”

WhatsApp offers in-app payments in India from 2020. The test in Brazil started in November.

MercadoLibre went public in 2007. In its first years of operation, it was seen as an equivalent eBay Inc. (NASDAQ: EBAY) Or Amazon.com Inc. (NASDAQ: AMZN).

The company has since expanded its operational capabilities and now includes a lending unit and internal shipping operations. It also operates a classified advertising platform that allows users to list vehicles, ships, aircraft, real estate and services outside of the Marketplace platform.

MercadoLibre reported that it had more than 88 million unique users in the most recent quarter and operated in 18 countries.

Strong profits and revenue growth

Despite this year’s weak share prices, sales and profits increased significantly in recent quarters. MarketBeat analyst data for MercadoLibre give a “moderate buy” rating on the stock with a price target of $1,317, representing a potential upside of 51.27%. The trendline connecting the series of recent price lows shows how this price could be reached by mid-2023.

Since the company’s last earnings report on November 3, Citigroup lowered its price target from $1,150 to $1,050. Nevertheless, this still reflects optimism about the potential growth of 23.34%.

MercadoLibre’s three-year revenue growth rate is 74%. Over the last eight quarters, sales have increased from 45% to 111%.

Financial results have been more uneven, with losses in 2018, 2019 and 2020. The company returned to profitability last year, earning $1.67 per share. Analysts expect the company to earn $8.47 per share this year, up 407%, and grow another 63% next year to $13.78 per share.

This number has recently been revised upwards, but not necessarily because analysts have considered the potential of a partnership with WhatsApp.

Will the WhatsApp partnership increase MercadoLibres' earnings?

Lost earnings views

Salary data collected by MarketBeat show that MercadoLibre has not reported financial results in the last three quarters. Additionally, one of these quadrants didn’t get the best views.

The MercadoLibre chart shows the base of the first stage, which started in mid-August. So far, it has been corrected by 31%, although it is recording a fifth week in a row of declines. The stock is down 10.69% over the past month and 7.76% over the past three months.

So far, the stock is holding above its previous mid-June low of $600.68. However, as of Wednesday, stocks were trading below the short- and long-term moving averages mid-session. This means that the stock still needs to rise, which could make it a less risky investment candidate.

Generally speaking, it’s better to focus on stocks that are starting to rise rather than get carried away by a correction.