MercadoLibre
MELI
entered into an agreement with the money-transferring company
Western Union
WU
.
The collaboration will help families living abroad send digital remittances to Mexico through Western Union and enable recipients to collect the payment through MercadoLibre’s Mercado Pago.
On the back of this partnership, the South American e-commerce giant aims to help people in Mexico collect the remittance digitally without the need to collect cash from a physical location and carry it from one place to another.
With the Western Union partnership, MercadoLibre strives to gain momentum among people in Mexico collecting remittances in cash. Reportedly, more than 70% of remittances are now collected in cash in the country.
This is expected to boost the adoption rate of Mercado Pago in the country which in turn will drive MercadoLibre’s top-line growth in Mexico in the days ahead.
MercadoLibre generated $364 million revenues (16.2% of total revenues) in the first-quarter of 2022, increasing 58% year over year.
MercadoLibre, Inc. Price and Consensus
MercadoLibre, Inc. price-consensus-chart
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MercadoLibre, Inc. Quote
Mercado Pago in Focus
The alliance with Western Union bodes well with MercadoLibre’s growing efforts toward strengthening the Mercado Pago unit.
Mercado Pago provides users with notable technological solutions like wallet payment online, in-app or in-store transfers, withdrawals and fintech active products, such as asset management and insurtech.
The digital payment arm’s strong initiatives to strengthen its credit business for individual and merchant users remain another positive.
Last month, MercadoLibre introduced a life insurance offering in Brazil through Mercado Pago, to expand its presence in the country.
Additionally, the recent acquisition of a Chile-based payment services provider Redelcom, which is now part of Mercado Pago, remains noteworthy.
Strength in Mercado Pago is helping MercadoLibre attract more customers to its fintech business. MELI reported 36 million active users in fintech in the first quarter of 2022, up 31.1% from the prior-year quarter’s level.
Growing number of active users are driving MercadoLibre’s total payment volume (TPV), which in turn, is benefiting its financial performance. In the first quarter, TPV was $25.3 billion, which rose 72% year over year on a reported basis.
Bottom Line
We believe that the recent partnership with Western Union will help MercadoLibre strengthen its position in Mexico.
Further, the collaboration is in sync with MELI’s growing focus toward expanding its footprint in the digital payment space in Latin America.
However, MercadoLibre might witness a fall in remittances coming to Mexico from the United States in the near term due to an expected recession in the latter nation. This is expected to get reflected in the revenues generated by MELI from the former country.
Adverse foreign exchange fluctuations and intense competition in the e-commerce market remain a headwind.
Shares of MercadoLibre have been down 47.8% in the year-to-date period, lagging the Zacks
Retail-Wholesale
sector’s decline of 24.5%.
Zacks Rank & Stocks to Consider
Currently, MercadoLibre carries a Zacks Rank #5 (Strong Sell).
Investors interested in the retail-wholesale sector can consider some better-ranked stocks like
Capri Holdings
CPRI
and
Penske Automotive Group
PAG
. While Penske Automotive Group currently sports a Zacks Rank #1 (Strong Buy), Capri Holdings carries a Zacks Rank #2 (Buy). You can see
the complete list of today’s Zacks #1 Rank stocks here
.
Penske Automotive Group has lost 2.7% on a year-to-date basis. The long-term earnings growth rate for PAG is currently projected at 20.04%.
Capri Holdings has lost 35.9% on a year-to-date basis. The long-term earnings growth rate for CPRI is currently projected at 32.2%.
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