⁠Wall St Engine
CHINA’S PRESIDENT XI: I'M LOOKING FORWARD TO TALKING TIES AND COOPERATION WITH PUTIN
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⁠Wall St Engine
TRUMP SAYS CHINA SHOULD REASSESS WHO ASKED FOR A MEETIN
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⁠Wall St Engine
ROBINHOOD $HOOD SAID TO PLAN BLOCKCHAIN TO TRADE US ASSETS IN EUROPE
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⁠Dimitry Nakhla | Babylon Capital®
RT @DimitryNakhla: A quality valuation analysis on $MELI 🧘🏽‍♂️

•NTM P/E Ratio: 44.66x
•1-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 🧠***

Before we get into valuation, let’s take a look at why $MELI is a great business

BALANCE SHEET✅
•Cash & Short-Term Inv: $3.70B
•Long-Term Debt: $2.82B

$MELI has a strong balance sheet, an ok BB+ S&P Credit Rating & 48x FFO Interest Coverage

RETURN ON CAPITAL🆗➡️✅
•2019: (4.8%)
•2020: 3.7%
•2021: 8.1%
•2022: 14.7%
•2023: 25.7%
•2024: 23.0%

RETURN ON EQUITY🆗➡️✅
•2019: (14.2%)
•2020: (0.1%)
•2021: 5.2%
•2022: 28.7%
•2023: 40.3%
•2024: 51.5%

$MELI has strong and improved return metrics, highlighting the financial efficiency of the business

REVENUES✅
•2019: $2.30B
•2024: $20.78B
•CAGR: 55.30%

FREE CASH FLOW✅
•2019: $314.29M
•2024: $7.05B
•CAGR: 86.32%

NORMALIZED EPS✅
•2019: ($3.71)
•2024: $37.69

SHARE BUYBACKS❌
•2019 Shares Outstanding: 48.69M
•LTM Shares Outstanding: 50.70M

MARGINS🆗➡️✅
•LTM Gross Margins: 52.7%
•LTM Operating Margins: 12.7%
•LTM Net Income Margins: 9.2%

***NOW TO VALUATION 🧠

As stated above, investors can expect to receive ~7% MORE in EPS

Using Benjamin Graham’s 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 let’s assume $MELI ends 2027 with $84.98 in EPS & see its CAGR potential assuming different multiples

40x P/E: $3400💵 … ~17.6% CAGR

38x P/E: $3230💵 … ~15.4% CAGR

36x P/E: $3060💵 … ~13.2% CAGR

34x P/E: $2890💵 … ~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 🔑

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 $2165💵 are buying it for a fair price, with little margin of safety — 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 $1945💵 (~10% below today’s price) where I can reasonably expect ~12% CAGR while assuming a conservative 32x end multiple, ensuring some margin of safety

#stocks #investing
___

𝐃𝐈𝐒𝐂𝐋𝐎𝐒𝐔𝐑𝐄‼️: 𝐓𝐡𝐢𝐬 𝐢𝐬 𝐍𝐎𝐓 𝐈𝐧𝐯𝐞𝐬𝐭𝐦𝐞𝐧𝐭 𝐀𝐝𝐯𝐢𝐜𝐞. 𝐁𝐚𝐛𝐲𝐥𝐨𝐧 𝐂𝐚𝐩𝐢𝐭𝐚𝐥® 𝐚𝐧𝐝 𝐢𝐭𝐬 𝐫𝐞𝐩𝐫𝐞𝐬𝐞𝐧𝐭𝐚𝐭𝐢𝐯𝐞𝐬 𝐦𝐚𝐲 𝐡𝐚𝐯𝐞 𝐩𝐨𝐬𝐢𝐭𝐢𝐨𝐧𝐬 𝐢𝐧 𝐭𝐡𝐞 𝐬𝐞𝐜𝐮𝐫𝐢𝐭𝐢𝐞𝐬 𝐝𝐢𝐬𝐜𝐮𝐬𝐬𝐞𝐝 𝐢𝐧 𝐭𝐡𝐢𝐬 𝐭𝐰𝐞𝐞𝐭.

𝐓𝐡𝐞 𝐢𝐧𝐟𝐨𝐫𝐦𝐚𝐭𝐢𝐨𝐧 𝐜𝐨𝐧𝐭𝐚𝐢𝐧𝐞𝐝 𝐢𝐧 𝐭𝐡𝐢𝐬 𝐭𝐰𝐞𝐞𝐭 𝐢𝐬 𝐢𝐧𝐭𝐞𝐧𝐝𝐞𝐝 𝐟𝐨𝐫 𝐢𝐧𝐟𝐨𝐫𝐦𝐚𝐭𝐢𝐨𝐧𝐚𝐥 𝐩𝐮𝐫𝐩𝐨𝐬𝐞𝐬 𝐨𝐧𝐥𝐲 𝐚𝐧𝐝 𝐬𝐡𝐨𝐮𝐥𝐝 𝐧𝐨𝐭 𝐛𝐞 𝐜𝐨𝐧𝐬𝐭𝐫𝐮𝐞𝐝 𝐚𝐬 𝐢𝐧𝐯𝐞𝐬𝐭𝐦𝐞𝐧𝐭 𝐚𝐝𝐯𝐢𝐜𝐞 𝐭𝐨 𝐦𝐞𝐞𝐭 𝐭𝐡𝐞 𝐬𝐩𝐞𝐜𝐢𝐟𝐢𝐜 𝐧𝐞𝐞𝐝𝐬 𝐨𝐟 𝐚𝐧𝐲 𝐢𝐧𝐝𝐢𝐯𝐢𝐝𝐮𝐚𝐥 𝐨𝐫 𝐬𝐢𝐭𝐮𝐚𝐭𝐢𝐨𝐧. 𝐏𝐚𝐬𝐭 𝐩𝐞𝐫𝐟𝐨𝐫𝐦𝐚𝐧𝐜𝐞 𝐢𝐬 𝐧𝐨 𝐠𝐮𝐚𝐫𝐚𝐧𝐭𝐞𝐞 𝐨𝐟 𝐟𝐮𝐭𝐮𝐫𝐞 𝐫𝐞𝐬𝐮𝐥𝐭𝐬.

𝐈𝐧𝐟𝐨𝐫𝐦𝐚𝐭𝐢𝐨𝐧 𝐜𝐨𝐧𝐭𝐚𝐢𝐧𝐞𝐝 𝐢�[...]

� 𝐭𝐡𝐢𝐬 𝐭𝐰𝐞𝐞𝐭 𝐡𝐚𝐬 𝐛𝐞𝐞𝐧 𝐨𝐛𝐭𝐚𝐢𝐧𝐞𝐝 𝐟𝐫𝐨𝐦 𝐬𝐨𝐮𝐫𝐜𝐞𝐬 𝐛𝐞𝐥𝐢𝐞𝐯𝐞𝐝 𝐭𝐨 𝐛𝐞 𝐫𝐞𝐥𝐢𝐚𝐛𝐥𝐞, 𝐛𝐮𝐭 𝐢𝐬 𝐧𝐨𝐭 𝐠𝐮𝐚𝐫𝐚𝐧𝐭𝐞𝐞𝐝 𝐚𝐬 𝐭𝐨 𝐜𝐨𝐦𝐩𝐥𝐞𝐭𝐞𝐧𝐞𝐬𝐬 𝐨𝐫 𝐚𝐜𝐜𝐮𝐫𝐚𝐜𝐲.
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⁠Wall St Engine
FED’S POWELL:

ECONOMY IS IN A SOLID POSITION; LABOR-MARKET CONDITIONS HAVE REMAINED SOLID

SURVEYS SUGGEST TARIFFS DRIVING INFLATION EXPECTATIONS

LONGER-TERM INFLATION EXPECTATIONS CONSISTENT WITH GOAL

CURRENT POLICY STANCE LEAVES FED ‘WELL-POSITIONED’ TO RESPOND IN TIMELY MANNER

UNUSUAL SWING IN TRADE COMPLICATED GDP MEASUREMENT
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⁠Wall St Engine
FED POWELL: TARIFFS ANNOUNCED SO FAR HAVE BEEN SIGNIFICANTLY LARGER THAN ANTICIPATED
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⁠Wall St Engine
FED POWELL: WAITING FOR GREATER CLARITY BEFORE ADJUSTING POLICY
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⁠Wall St Engine
FED POWELL: IF LARGE INCREASES IN TARIFFS AS ANNOUNCED ARE SUSTAINED, WILL SEE HIGHER INFLATION, LOWER EMPLOYMENT
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⁠Wall St Engine
POWELL REITERATES: IN A GOOD PLACE TO WAIT AND SEE; DON'T THINK WE NEED TO BE IN A HURRY, CAN BE PATIENT
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⁠Wall St Engine
FED POWELL: WHEN THINGS DEVELOP, WE CAN MOVE QUICKLY WHEN APPROPRIATE, CAN'T GIVE A TIMEFRAME ON THAT
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⁠Wall St Engine
FED POWELL:

WON'T MAKE PROGRESS ON GOALS THIS YEAR IF TARIFFS STAY

THIS IS NOT A SITUATION WHERE WE CAN BE PREEMPTIVE

THE 2024 RATE CUTS WEREN'T PREEMPTIVE. "IF ANYTHING, IT WAS A LITTLE LATE."
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⁠Wall St Engine
FED POWELL: TRUMP CALLING FOR RATE CUTS DOESN'T AFFECT OUR JOB AT ALL
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⁠Wall St Engine
FED POWELL:

I CAN'T CONFIDENTLY SAY I KNOW THE APPROPRIATE RATE PATH; MY GUT TELLS ME THAT UNCERTAINTY IS EXTREMELY ELEVATED

RISKS OF HIGHER UNEMPLOYMENT AND HIGHER INFLATION HAVE RISEN, BUT NOT YET IN DATA
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⁠Wall St Engine
FED POWELL:

QE WASNT BEYOND THE CONFINES OF OUR MANDATE; WE COULD HAVE EXPLAINED IT BETTER

DIDNT WANT SHARP TIGHTENING OF FINANCIAL CONDITIONS WHEN ECONOMY WAS VULNERABLE

ON CLIMATE, OVER AND OVER YOU'VE HEARD ME SAY FED'S ROLE IS VERY VERY NARROW

THAT'S WHAT WE'VE DONE; WE'VE DONE VERY LITTLE ON CLIMATE
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⁠Wall St Engine
FED POWELL: WE DON'T SEE BIG ECONOMIC EFFECTS IN THE DATA YET; PEOPLE ARE WORRIED, BUT SHOCK HASN'T HIT YET
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⁠Wall St Engine
POWELL: THE DEBT IS ON AN UNSUSTAINABLE PATH
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