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โ Dimitry Nakhla | Babylon Capitalยฎ
A quality valuation analysis on $MELI ๐ง๐ฝโโ๏ธ
โขNTM P/E Ratio: 44.66x
โข1-Year Mean: 47.97x
As you can see, $MELI appears to be trading near fair value
Going forward, investors can receive ~7% MORE in earnings per share ๐ง ***
Before we get into valuation, letโs take a look at why $MELI is a great business
BALANCE SHEETโ
โขCash & Short-Term Inv: $3.70B
โขLong-Term Debt: $2.82B
$MELI has a strong balance sheet, an ok BB+ S&P Credit Rating & 48x FFO Interest Coverage
RETURN ON CAPITAL๐โก๏ธโ
โข2019: (4.8%)
โข2020: 3.7%
โข2021: 8.1%
โข2022: 14.7%
โข2023: 25.7%
โข2024: 23.0%
RETURN ON EQUITY๐โก๏ธโ
โข2019: (14.2%)
โข2020: (0.1%)
โข2021: 5.2%
โข2022: 28.7%
โข2023: 40.3%
โข2024: 51.5%
$MELI has strong and improved return metrics, highlighting the financial efficiency of the business
REVENUESโ
โข2019: $2.30B
โข2024: $20.78B
โขCAGR: 55.30%
FREE CASH FLOWโ
โข2019: $314.29M
โข2024: $7.05B
โขCAGR: 86.32%
NORMALIZED EPSโ
โข2019: ($3.71)
โข2024: $37.69
SHARE BUYBACKSโ
โข2019 Shares Outstanding: 48.69M
โขLTM Shares Outstanding: 50.70M
MARGINS๐โก๏ธโ
โขLTM Gross Margins: 52.7%
โขLTM Operating Margins: 12.7%
โขLTM Net Income Margins: 9.2%
***NOW TO VALUATION ๐ง
As stated above, investors can expect to receive ~7% MORE in EPS
Using Benjamin Grahamโs 2G rule of thumb, $MELI has to grow earnings at a 22.33% CAGR over the next several years to justify its valuation
Today, analysts anticipate 2025 - 2027 EPS growth over the next few years to be more than the (22.33%) required growth rate:
2025E: $46.91 (24.5% YoY)
2026E: $64.98 (38.5% YoY)
2027E: $84.98 (30.8% YoY)
$MELI has an ok track record of meeting analyst estimates ~2 years out, but letโs assume $MELI ends 2027 with $84.98 in EPS & see its CAGR potential assuming different multiples
40x P/E: $3400๐ต โฆ ~17.6% CAGR
38x P/E: $3230๐ต โฆ ~15.4% CAGR
36x P/E: $3060๐ต โฆ ~13.2% CAGR
34x P/E: $2890๐ต โฆ ~10.9% CAGR
As you can see, $MELI appears to have attractive return potential IF we assume >36x earnings (a multiple justified by its growth rate & moat)
$MELI boasts an expansive growth trajectory, fueled by powerful network effects that should drive sustained momentum
Key factors contributing to its promising outlook include ๐
1. Margin expansion
2. Unparalleled access to Latin America's burgeoning economy
3. Network effects that produce self-reinforcing dynamics ensuring long-term competitiveness, among other things
Those buying $MELI today at $2165๐ต are buying it for a fair price, with little margin of safety โ however, these growth rates have to be revised down substantially for $MELI to miss the mark, even if the company grows earnings at 25% CAGR over the next 5 years, shareholders will likely end up with a decent return
I consider $MELI a strong buy closer to $1945๐ต (~10% below todayโs price) where I can reasonably expect ~12% CAGR while assuming a conservative 32x end multiple, ensuring some margin of safety
#stocks #investing
___
๐๐๐๐๐๐๐๐๐๐โผ๏ธ: ๐๐ก๐ข๐ฌ ๐ข๐ฌ ๐๐๐ ๐๐ง๐ฏ๐๐ฌ๐ญ๐ฆ๐๐ง๐ญ ๐๐๐ฏ๐ข๐๐. ๐๐๐๐ฒ๐ฅ๐จ๐ง ๐๐๐ฉ๐ข๐ญ๐๐ฅยฎ ๐๐ง๐ ๐ข๐ญ๐ฌ ๐ซ๐๐ฉ๐ซ๐๐ฌ๐๐ง๐ญ๐๐ญ๐ข๐ฏ๐๐ฌ ๐ฆ๐๐ฒ ๐ก๐๐ฏ๐ ๐ฉ๐จ๐ฌ๐ข๐ญ๐ข๐จ๐ง๐ฌ ๐ข๐ง ๐ญ๐ก๐ ๐ฌ๐๐๐ฎ๐ซ๐ข๐ญ๐ข๐๐ฌ ๐๐ข๐ฌ๐๐ฎ๐ฌ๐ฌ๐๐ ๐ข๐ง ๐ญ๐ก๐ข๐ฌ ๐ญ๐ฐ๐๐๐ญ.
๐๐ก๐ ๐ข๐ง๐๐จ๐ซ๐ฆ๐๐ญ๐ข๐จ๐ง ๐๐จ๐ง๐ญ๐๐ข๐ง๐๐ ๐ข๐ง ๐ญ๐ก๐ข๐ฌ ๐ญ๐ฐ๐๐๐ญ ๐ข๐ฌ ๐ข๐ง๐ญ๐๐ง๐๐๐ ๐๐จ๐ซ ๐ข๐ง๐๐จ๐ซ๐ฆ๐๐ญ๐ข๐จ๐ง๐๐ฅ ๐ฉ๐ฎ๐ซ๐ฉ๐จ๐ฌ๐๐ฌ ๐จ๐ง๐ฅ๐ฒ ๐๐ง๐ ๐ฌ๐ก๐จ๐ฎ๐ฅ๐ ๐ง๐จ๐ญ ๐๐ ๐๐จ๐ง๐ฌ๐ญ๐ซ๐ฎ๐๐ ๐๐ฌ ๐ข๐ง๐ฏ๐๐ฌ๐ญ๐ฆ๐๐ง๐ญ ๐๐๐ฏ๐ข๐๐ ๐ญ๐จ ๐ฆ๐๐๐ญ ๐ญ๐ก๐ ๐ฌ๐ฉ๐๐๐ข๐๐ข๐ ๐ง๐๐๐๐ฌ ๐จ๐ ๐๐ง๐ฒ ๐ข๐ง๐๐ข๐ฏ๐ข๐๐ฎ๐๐ฅ ๐จ๐ซ ๐ฌ๐ข๐ญ๐ฎ๐๐ญ๐ข๐จ๐ง. ๐๐๐ฌ๐ญ ๐ฉ๐๐ซ๐๐จ๐ซ๐ฆ๐๐ง๐๐ ๐ข๐ฌ ๐ง๐จ ๐ ๐ฎ๐๐ซ๐๐ง๐ญ๐๐ ๐จ๐ ๐๐ฎ๐ญ๐ฎ๐ซ๐ ๐ซ๐๐ฌ๐ฎ๐ฅ๐ญ๐ฌ.
๐๐ง๐๐จ๐ซ๐ฆ๐๐ญ๐ข๐จ๐ง ๐๐จ๐ง๐ญ๐๐ข๐ง๐๐ ๐ข๐ง ๐ญ๐ก๐ข๐ฌ ๐ญ๐ฐ๐๐[...]
A quality valuation analysis on $MELI ๐ง๐ฝโโ๏ธ
โขNTM P/E Ratio: 44.66x
โข1-Year Mean: 47.97x
As you can see, $MELI appears to be trading near fair value
Going forward, investors can receive ~7% MORE in earnings per share ๐ง ***
Before we get into valuation, letโs take a look at why $MELI is a great business
BALANCE SHEETโ
โขCash & Short-Term Inv: $3.70B
โขLong-Term Debt: $2.82B
$MELI has a strong balance sheet, an ok BB+ S&P Credit Rating & 48x FFO Interest Coverage
RETURN ON CAPITAL๐โก๏ธโ
โข2019: (4.8%)
โข2020: 3.7%
โข2021: 8.1%
โข2022: 14.7%
โข2023: 25.7%
โข2024: 23.0%
RETURN ON EQUITY๐โก๏ธโ
โข2019: (14.2%)
โข2020: (0.1%)
โข2021: 5.2%
โข2022: 28.7%
โข2023: 40.3%
โข2024: 51.5%
$MELI has strong and improved return metrics, highlighting the financial efficiency of the business
REVENUESโ
โข2019: $2.30B
โข2024: $20.78B
โขCAGR: 55.30%
FREE CASH FLOWโ
โข2019: $314.29M
โข2024: $7.05B
โขCAGR: 86.32%
NORMALIZED EPSโ
โข2019: ($3.71)
โข2024: $37.69
SHARE BUYBACKSโ
โข2019 Shares Outstanding: 48.69M
โขLTM Shares Outstanding: 50.70M
MARGINS๐โก๏ธโ
โขLTM Gross Margins: 52.7%
โขLTM Operating Margins: 12.7%
โขLTM Net Income Margins: 9.2%
***NOW TO VALUATION ๐ง
As stated above, investors can expect to receive ~7% MORE in EPS
Using Benjamin Grahamโs 2G rule of thumb, $MELI has to grow earnings at a 22.33% CAGR over the next several years to justify its valuation
Today, analysts anticipate 2025 - 2027 EPS growth over the next few years to be more than the (22.33%) required growth rate:
2025E: $46.91 (24.5% YoY)
2026E: $64.98 (38.5% YoY)
2027E: $84.98 (30.8% YoY)
$MELI has an ok track record of meeting analyst estimates ~2 years out, but letโs assume $MELI ends 2027 with $84.98 in EPS & see its CAGR potential assuming different multiples
40x P/E: $3400๐ต โฆ ~17.6% CAGR
38x P/E: $3230๐ต โฆ ~15.4% CAGR
36x P/E: $3060๐ต โฆ ~13.2% CAGR
34x P/E: $2890๐ต โฆ ~10.9% CAGR
As you can see, $MELI appears to have attractive return potential IF we assume >36x earnings (a multiple justified by its growth rate & moat)
$MELI boasts an expansive growth trajectory, fueled by powerful network effects that should drive sustained momentum
Key factors contributing to its promising outlook include ๐
1. Margin expansion
2. Unparalleled access to Latin America's burgeoning economy
3. Network effects that produce self-reinforcing dynamics ensuring long-term competitiveness, among other things
Those buying $MELI today at $2165๐ต are buying it for a fair price, with little margin of safety โ however, these growth rates have to be revised down substantially for $MELI to miss the mark, even if the company grows earnings at 25% CAGR over the next 5 years, shareholders will likely end up with a decent return
I consider $MELI a strong buy closer to $1945๐ต (~10% below todayโs price) where I can reasonably expect ~12% CAGR while assuming a conservative 32x end multiple, ensuring some margin of safety
#stocks #investing
___
๐๐๐๐๐๐๐๐๐๐โผ๏ธ: ๐๐ก๐ข๐ฌ ๐ข๐ฌ ๐๐๐ ๐๐ง๐ฏ๐๐ฌ๐ญ๐ฆ๐๐ง๐ญ ๐๐๐ฏ๐ข๐๐. ๐๐๐๐ฒ๐ฅ๐จ๐ง ๐๐๐ฉ๐ข๐ญ๐๐ฅยฎ ๐๐ง๐ ๐ข๐ญ๐ฌ ๐ซ๐๐ฉ๐ซ๐๐ฌ๐๐ง๐ญ๐๐ญ๐ข๐ฏ๐๐ฌ ๐ฆ๐๐ฒ ๐ก๐๐ฏ๐ ๐ฉ๐จ๐ฌ๐ข๐ญ๐ข๐จ๐ง๐ฌ ๐ข๐ง ๐ญ๐ก๐ ๐ฌ๐๐๐ฎ๐ซ๐ข๐ญ๐ข๐๐ฌ ๐๐ข๐ฌ๐๐ฎ๐ฌ๐ฌ๐๐ ๐ข๐ง ๐ญ๐ก๐ข๐ฌ ๐ญ๐ฐ๐๐๐ญ.
๐๐ก๐ ๐ข๐ง๐๐จ๐ซ๐ฆ๐๐ญ๐ข๐จ๐ง ๐๐จ๐ง๐ญ๐๐ข๐ง๐๐ ๐ข๐ง ๐ญ๐ก๐ข๐ฌ ๐ญ๐ฐ๐๐๐ญ ๐ข๐ฌ ๐ข๐ง๐ญ๐๐ง๐๐๐ ๐๐จ๐ซ ๐ข๐ง๐๐จ๐ซ๐ฆ๐๐ญ๐ข๐จ๐ง๐๐ฅ ๐ฉ๐ฎ๐ซ๐ฉ๐จ๐ฌ๐๐ฌ ๐จ๐ง๐ฅ๐ฒ ๐๐ง๐ ๐ฌ๐ก๐จ๐ฎ๐ฅ๐ ๐ง๐จ๐ญ ๐๐ ๐๐จ๐ง๐ฌ๐ญ๐ซ๐ฎ๐๐ ๐๐ฌ ๐ข๐ง๐ฏ๐๐ฌ๐ญ๐ฆ๐๐ง๐ญ ๐๐๐ฏ๐ข๐๐ ๐ญ๐จ ๐ฆ๐๐๐ญ ๐ญ๐ก๐ ๐ฌ๐ฉ๐๐๐ข๐๐ข๐ ๐ง๐๐๐๐ฌ ๐จ๐ ๐๐ง๐ฒ ๐ข๐ง๐๐ข๐ฏ๐ข๐๐ฎ๐๐ฅ ๐จ๐ซ ๐ฌ๐ข๐ญ๐ฎ๐๐ญ๐ข๐จ๐ง. ๐๐๐ฌ๐ญ ๐ฉ๐๐ซ๐๐จ๐ซ๐ฆ๐๐ง๐๐ ๐ข๐ฌ ๐ง๐จ ๐ ๐ฎ๐๐ซ๐๐ง๐ญ๐๐ ๐จ๐ ๐๐ฎ๐ญ๐ฎ๐ซ๐ ๐ซ๐๐ฌ๐ฎ๐ฅ๐ญ๐ฌ.
๐๐ง๐๐จ๐ซ๐ฆ๐๐ญ๐ข๐จ๐ง ๐๐จ๐ง๐ญ๐๐ข๐ง๐๐ ๐ข๐ง ๐ญ๐ก๐ข๐ฌ ๐ญ๐ฐ๐๐[...]
Offshore
โ Dimitry Nakhla | Babylon Capitalยฎ A quality valuation analysis on $MELI ๐ง๐ฝโโ๏ธ โขNTM P/E Ratio: 44.66x โข1-Year Mean: 47.97x As you can see, $MELI appears to be trading near fair value Going forward, investors can receive ~7% MORE in earnings per shareโฆ
๐ญ ๐ก๐๐ฌ ๐๐๐๐ง ๐จ๐๐ญ๐๐ข๐ง๐๐ ๐๐ซ๐จ๐ฆ ๐ฌ๐จ๐ฎ๐ซ๐๐๐ฌ ๐๐๐ฅ๐ข๐๐ฏ๐๐ ๐ญ๐จ ๐๐ ๐ซ๐๐ฅ๐ข๐๐๐ฅ๐, ๐๐ฎ๐ญ ๐ข๐ฌ ๐ง๐จ๐ญ ๐ ๐ฎ๐๐ซ๐๐ง๐ญ๐๐๐ ๐๐ฌ ๐ญ๐จ ๐๐จ๐ฆ๐ฉ๐ฅ๐๐ญ๐๐ง๐๐ฌ๐ฌ ๐จ๐ซ ๐๐๐๐ฎ๐ซ๐๐๐ฒ.
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Offshore
Video
โ The All-In Podcast
David Friedberg: Democrats Have a "Two Party Problem"
On E220, @friedberg theorized why the Democratic Party's popularity has hit an all-time low:
"I think the Democratic Party has split into two parties."
"There's the Democratic Party with beliefs and there's the Democratic Party without beliefs."
"The Democratic Party with beliefs is the one that's very far left, and their beliefs are fundamentally rooted in concepts of socialism, Marxism."
"And they're very clear about those beliefs that traditional power structures need to be dismantled and assets and influence need to be commonly redistributed."
"The rest of the Democratic Party, which people call the moderate part of the party, actually don't really know what their beliefs are."
Friedberg goes on to contrast this with the state of the Republican Party, which he observed during a trip to DC:
"When you talk to anyone in the Republican Party in a leadership position, you hear very clearly what their beliefs are."
"We saw it this week in DC."
"Every member of the cabinet that we met with, and there were quite a number of them, had the exact same message and the exact same set of beliefs of what this administration stands for and what they're trying to do."
"The problem is that, because the moderates in the Democratic Party have not stated a set of beliefs, the party is effectively being represented by this part of the party that does have beliefs, the deeply socialist Marxist beliefs."
"And they have basically subsumed the message."
"And as a result, this is why people have lost interest in the Democratic Party."
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David Friedberg: Democrats Have a "Two Party Problem"
On E220, @friedberg theorized why the Democratic Party's popularity has hit an all-time low:
"I think the Democratic Party has split into two parties."
"There's the Democratic Party with beliefs and there's the Democratic Party without beliefs."
"The Democratic Party with beliefs is the one that's very far left, and their beliefs are fundamentally rooted in concepts of socialism, Marxism."
"And they're very clear about those beliefs that traditional power structures need to be dismantled and assets and influence need to be commonly redistributed."
"The rest of the Democratic Party, which people call the moderate part of the party, actually don't really know what their beliefs are."
Friedberg goes on to contrast this with the state of the Republican Party, which he observed during a trip to DC:
"When you talk to anyone in the Republican Party in a leadership position, you hear very clearly what their beliefs are."
"We saw it this week in DC."
"Every member of the cabinet that we met with, and there were quite a number of them, had the exact same message and the exact same set of beliefs of what this administration stands for and what they're trying to do."
"The problem is that, because the moderates in the Democratic Party have not stated a set of beliefs, the party is effectively being represented by this part of the party that does have beliefs, the deeply socialist Marxist beliefs."
"And they have basically subsumed the message."
"And as a result, this is why people have lost interest in the Democratic Party."
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Offshore
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โ The Kobeissi Letter
BREAKING: Short interest on US stocks has jumped to ~2.3%, the highest since the 2020 pandemic.
Short interest as a % of shares outstanding has soared ~20% over the last few weeks.
This is one of the fastest surges in short interest in at least a decade.
Meanwhile, the S&P 500 and the Nasdaq 100 have rallied 4.7% and 5.0% since their Wednesday low.
All while the Volatility index, $VIX, has plummeted 41%, or 12 points, to 17.5, over the last 2 weeks.
Can the short-squeeze hold?
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BREAKING: Short interest on US stocks has jumped to ~2.3%, the highest since the 2020 pandemic.
Short interest as a % of shares outstanding has soared ~20% over the last few weeks.
This is one of the fastest surges in short interest in at least a decade.
Meanwhile, the S&P 500 and the Nasdaq 100 have rallied 4.7% and 5.0% since their Wednesday low.
All while the Volatility index, $VIX, has plummeted 41%, or 12 points, to 17.5, over the last 2 weeks.
Can the short-squeeze hold?
The case for a SHORT SQUEEZE:
Since February 19th, the S&P 500 has erased -$5 TRILLION in its most one-sided move since the 2022 bear market.
Total PUT option volumes have surged to a record 30+ MILLION contracts over the last 5 days.
Is a short squeeze coming?
(a thread) https://t.co/AutLiKW7Yh tweet
Offshore
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โ The Kobeissi Letter
Once the hottest stock in the market, Nvidia, $NVDA, has seen almost zero NET movement in 6 months.
The stock is currently trading at the same levels seen in June 2024.
Even as the broader market recovers, $NVDA can barely hold $120.
Has Nvidia lost its momentum? https://t.co/qQaqMCRHtv
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Once the hottest stock in the market, Nvidia, $NVDA, has seen almost zero NET movement in 6 months.
The stock is currently trading at the same levels seen in June 2024.
Even as the broader market recovers, $NVDA can barely hold $120.
Has Nvidia lost its momentum? https://t.co/qQaqMCRHtv
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Offshore
Photo
โ The Kobeissi Letter
BREAKING: There is now a 73% chance that President Trump will create the "External Revenue Service," per @Kalshi.
Odds surged after Commerce Secretary Lutnick said April 2nd tariffs will launch the External Revenue Service.
We are now 8 days out from retaliatory tariffs going live.
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BREAKING: There is now a 73% chance that President Trump will create the "External Revenue Service," per @Kalshi.
Odds surged after Commerce Secretary Lutnick said April 2nd tariffs will launch the External Revenue Service.
We are now 8 days out from retaliatory tariffs going live.
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Offshore
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โ Quiver Quantitative
Representative Greg Steube has introduced a resolution to authorize the use of military force against certain Mexican cartels: https://t.co/MvWIX20GQi
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Representative Greg Steube has introduced a resolution to authorize the use of military force against certain Mexican cartels: https://t.co/MvWIX20GQi
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Offshore
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โ Finding Compounders
RT @gainify_io: Believe it or not, Wall Street sees nearly 80% upside for $TTD https://t.co/21uuS7Evp6
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RT @gainify_io: Believe it or not, Wall Street sees nearly 80% upside for $TTD https://t.co/21uuS7Evp6
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