Market Movers: It Just Keeps Getting Better For MercadoLibre
Happy Saturday folks,
The hits just keep comin’ as earnings season continues at full speed. With Big Tech out of the way last week, this week saw some real fan favorites take the stage and reveal their books to the world.
For many, it’s really just become a case of surviving as investors have become highly reactionary to any negative report. This, coupled with the general reluctance right now to back growth or tech stocks has spelled disaster for some companies — particularly the pandemic darlings that have now become victims of their own rampant success, with earnings just not able to keep pace with previous figures.
As we always like to remind you though, one quarterly earnings report only represents 2.5% of a 10-year investing horizon. Earnings reports are certainly important, and it’s painful to watch your investments enter the red, but remember the old Warren Buffett adage:
“Be fearful when others are greedy, and greedy when others are fearful.”
Let’s get into this week's winners and losers, shall we?
Here were the biggest movers in the MyWallSt shortlist this week:
Moving Up ⬆️
MercadoLibre (MELI) +27.2%
Roku Inc. (ROKU) +24.1%
Lemonade (LMND) +23.7%
DraftKings (DKNG) +19.2%
Block (SQ) +17.9%
Moving Down ⬇️
Eventbrite (EB) -12.6%
Match Group (MTCH) -9.2%
Markel Corp (MKL) -8.9%
2U (TWOU) -6.2%
Cognex (CGNX) -5.9%
The Winners ⬆️
Soaring over 27% this week, it’s safe to say that Meli investors are among the happiest on Wall Street right now. Why did MercadoLibre (MELI) pop so much I hear you ask? At this time of year, there are very few other possible reasons — earnings of course.
The Latin American e-commerce titan posted record payment volume, sales volume, revenue and buyers, improved margins, and profits far exceeding analysts’ expectations — not bad right?
Revenue of $2.6 billion marked another quarterly record and represents growth of 53% in U.S. dollars and 57% on an FX-neutral basis. The revenue split is roughly evenly distributed between the commerce and fintech sides of the business, with commerce making the slight majority.
There’s just no slowing down right now for this juggernaut of a stock. However, while not wanting to be the bearer of bad news, it must be pointed out that MercadoLibre is still down just over 22% year-to-date. While this is a lot better than many of its tech-based brethren, let’s not get too overhyped about one solid earnings call — regardless of how utterly brilliant it was.
In a move that really reflects the wider market right now, Roku (ROKU) has yo-yoed itself into the winners' list this week having clawed its way back following a disappointing earnings call. The streaming player had sank by 23% last Friday following costly misses on revenue and earnings, while weaker-than-expected guidance also had shareholders fretting.
However, following this significant loss on Friday, the company’s stock has rallied by just over 24% this week. One of the chief reasons behind this is likely to be Cathie Wood’s conviction to buy the dip, with her Ark Funds picking up close to $31 million worth of Roku stock following the initial investor sell-off.
Maybe other investors did their due diligence and believe that Roku is actually undervalued and has a clear runway to better days in the near future. Maybe they blindly followed the actions of one of the world’s most famed investors in the hope of letting her picks guide their portfolio. The truth, as always, is likely a combination of the two.
Roku still has a lot going for it as a stock, but the reopening of economies and a harsh economic environment have resulted in a steep deceleration of revenue growth As of now, it’s one of the worst-performing stocks of 2022. With that in mind, let’s not begrudge its investors a rare positive week.
The Losers ⬇️
Now onto the losers, and it’s been a tough week for Eventbrite (EB). The ticketing software company sank by over 12% on Monday following a less-than-stellar earnings report. Despite revenue coming in at the high end of expectations, wider than expected losses, and, most pertinently for investors, guidance that fell well below what Wall Street had been targeting had the stock falling.
Revenue in the quarter came to $66 million, up 43% year-over-year thanks to a 37% increase in ticket volume from sustained demand and the return of larger events. However, a net loss of $20.1 million for the quarter was driven largely by increased operating expenses and a foreign-exchange squeeze as a result of the strengthening U.S. dollar.
For investors though, the real reason for the sell-off came down to guidance, with management giving a very cautious outlook for Q3. It expects revenue to fall between $65 and $68 million next quarter, well below analysts’ estimates.
The COVID-19 pandemic decimated the events industry and effectively shuttered Eventbrite’s main revenue flow, but the company was able to pivot to remote events and build some decent momentum despite suffering financially. Now, however, investors are looking for a return on investment with live events back in full swing. With its stock down almost 50% year-to-date, changes will have to be made.