As one of the priciest stocks on the market, MercadoLibre (NASDAQ:MELI) could announce a stock split as soon as next week when the leading Latin American e-commerce and fintech platform reports third-quarter earnings.
MercadoLibre is seeing tremendous growth in its home market of Brazil, as well as surging revenue in Mexico. With sales and profits soaring, MELI stock now trades at more than $2,020 per share. That’s the sixth richest price of any other stock.
It makes for a compelling argument for the e-commerce and fintech star to split its stock, something it has never done in its 17 years as a publicly-traded company. With its shares up 28% in 2024, 65% higher over the past year, and 200% higher since mid-2022 — four times the gains of the S&P 500 over that period — MercadoLibre is ripe for a stock split.
24/7 Wall St. Insights:
- MercadoLibre (MELI) is the leading e-commerce and fintech platform in Latin America, is the sixth priciest stock on the market, and has never split its stock.
- At over $2,020 a share, MELI has returned 7,000% since its 2007 IPO for a 32% CAGR.
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A MELI stock split makes sense
Of course, a stock split means nothing to the company. Whether it is trading at $2,020 per share or $202 per share after a 10-for-1 split, the underlying fundamentals of the business don’t change.
What is altered is how many shares outstanding are there and whether small, retail investors find MELI stock accessible. By increasing the number of shares outstanding (and lowering the price of the stock), MercadoLibre can bring in a completely new class of investors who currently find its elevated share price daunting to buy.
A stock split would increase liquidity, improve the efficiency between the bid-ask price, and potentially boost the stock’s trading volume. Those don’t impact whether its e-commerce or fintech operations remain popular, but they could influence whether MercadoLibre is added to a stock index.
Currently, MELI is only included on the Nasdaq 100 index, but it is more valuable on a market capitalization basis than over 400 stocks that trade on the S&P 500. But it has extremely low trading volume, and that might be one of the reasons the guardians of the benchmark index don’t include MercadoLibre (as well as the fact it doesn’t operate in the U.S.).
Business is booming south of the border
Because stock splits are viewed as bullish signals of future outperformance, the Latin American e-commerce company can easily make the case it has more growth in store.
Second-quarter revenue rocketed 59% higher from the year-ago period to more than $9.4 billion, generating a 90% surge in net income. MercadoLibre said all of its segments contributed to the superlative performance, with e-commerce gross merchandise value (GMV) rising 20% year-over-year and fintech total payment volume (TPV) soaring 36% higher.
As noted earlier, Mexico is becoming a significant growth market. Although still small compared to the whole, the country saw e-commerce sales gain 66% while fintech revenue rose 34%. Overall, MercadoLibre’s user base tripled during the quarter as assets under management more than doubled for the last 18 months.
It’s the kind of performance over time that has led MELI to generate 7,000% returns since its IPO. That’s a compound annual growth rate of 32%. It might not be able to continue producing those superior returns in the future, but there remains a significant growth runway ahead of it.
Earnings are scheduled for Wednesday, Nov. 6, and it is quite possible MercadoLibre will be the next stock split stock announcement you read about.
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