MercadoLibre shares fall as credit conditions squeeze profits – BNN Bloomberg

(Bloomberg) — MercadoLibre Inc. aggressively promotes Lending in Latin America led to lower third-quarter earnings, sending shares lower in late trading.

The e-commerce and fintech giant grew its total loan book 77% from a year earlier to $6 billion, with credit card exposure up 172% over the same period, according to the report. Provisions set aside for all loans reduced net income, which totaled $397 million, below the average estimate of $513 million among analysts surveyed by Bloomberg.

The company also increased investment in logistics this quarter, opening five new fulfillment centers in Brazil and another in Mexico, Chief Financial Officer Martin de los Santos said Wednesday in an interview ahead of the earnings report. Total revenue met expectations at $5.3 billion.

“It was a quarter of very strong growth as well as investment in some of our strategic initiatives, one of which is credit,” de los Santos said. “The credit card is an important part of our fintech strategy.” While that likely adds “a little pressure on earnings year over year,” the company believes it’s “the right investment for long-term growth opportunity,” he added.

The stock fell as much as 12% before recouping losses. They fell 5.5% to $1,999.99 as of 4:43 p.m. New York time.

MercadoLibre shares are up 35% this year, making the Uruguayan Montevideo-based firm the most valuable company in Latin America, with a market capitalization of $107 billion. While its commercial business generates about 60% of revenue, the company is heavily involved in financial services through its Mercado Pago division, which does everything from payment processing to lending and offering deposit accounts with above-market interest rates.

The total number of users in the commercial division grew to 61 million, while Mercado Pago had 56 million monthly active users. Gross merchandise value for the quarter was $12.9 billion, with Brazil and Mexico up 34% and 27%, respectively, in local currencies. The total amount of payments amounted to $50.7 billion.

In Argentina, MercadoLibre continues to see a recovery in consumer demand as Javier Miley’s administration tries to stabilize the economy, de los Santos said, and the firm has been increasing its lending.

While MercadoLibre does not disclose specific information by country, Mexican financial services is a bright spot at the moment, he said.

“We have seen tremendous growth in the country in terms of users, assets under management and loan portfolio—we had the largest loan book of any fintech company in Mexico,” de los Santos said. “So everything we do in Mexico works very well. The possibilities are enormous.”

(Updates on trading in first paragraph.)