⁠Dimitry Nakhla | Babylon Capital®
5 months ago I stated:

“I consider $MELI a strong buy closer to $1,700💵 (~9% below today’s price) where I can reasonably expect ~14% CAGR while assuming a 36x end multiple, ensuring some margin of safety”

Since reaching my $1,700 target $MELI shares have rallied +46%✅

As I suggested in the post attached below👇🏽

“$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 $1856💵 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 $1,700💵 (~9% below today’s price) where I can reasonably expect ~14% CAGR while assuming a 36x end multiple, ensuring some margin of safety”
____

While a rapid appreciation in share price can be gratifying, it's often counterintuitive for long-term investors

Ideally, I prefer to see these high-quality businesses trade at attractive valuations for an extended period, allowing for the accumulation of shares at a more favorable price

This enables us to build a larger position in a company we believe in, ultimately increasing our potential for long-term returns

A quality valuation analysis on $MELI 🧘🏽‍♂️

•NTM P/E Ratio: 49.60x
•1-Year Mean: 48.36x

As you can see, $MELI appears to be trading near fair value

Going forward, investors can receive roughly the same 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: $6.67B
•Long-Term Debt: $3.04B

$MELI has a strong balance sheet, an ok BB+ S&P Credit Rating & 20x FFO Interest Coverage

RETURN ON CAPITAL🆗➡️✅
•2019: (4.8%)
•2020: 3.7%
•2021: 8.1%
•2022: 14.2%
•2023: 25.3%
•LTM: 20.1%

RETURN ON EQUITY🆗➡️✅
•2019: (14.2%)
•2020: (0.1%)
•2021: 5.2%
•2022: 28.7%
•2023: 40.3%
•LTM: 42.6%

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

REVENUES✅
•2018: $1.44B
•2023: $14.47B
•CAGR: 58.64%

FREE CASH FLOW✅
•2018: $133.35M
•2023: $4.63B
•CAGR: 203.29%

NORMALIZED EPS✅
•2018: ($0.82)
•2023: $22.84

SHARE BUYBACKS❌
•2013 Shares Outstanding: 44.53M
•LTM Shares Outstanding: 51.28M

MARGINS🆗➡️✅
•LTM Gross Margins: 52.5%
•LTM Operating Margins: 11.4%
•LTM Net Income Margins: 7.8%

***NOW TO VALUATION 🧠

As stated above, investors can expect to receive roughly the same in EPS

Using Benjamin Graham’s 2G rule of thumb, $MELI has to grow earnings at a 24.80% CAGR over the next several years to justify its valuation

Today, analysts anticipate 2025 - 2026 EPS growth over the next few years to be more than the (24.80%) required growth rate:

2024E: $33.59 (47.1% YoY) *FY Dec

2025E: $45.76 (36.2% YoY)
2026E: $62.50 (36.6% YoY)

$MELI has an ok track record of meeting analyst estimates ~2 years out, but let’s assume $MELI ends 2026 with $62.50 in EPS & see its CAGR potential assuming different multiples

40x P/E: $2500💵 … ~15.5% CAGR

38x P/E: $2375💵 … ~12.7% CAGR

36x P/E: $2250💵 … ~9.7% CAGR

34x P/E: $2125💵 … ~6.7% CAGR

As you can see, $MELI appears to have attractive return potential IF we assume >38x earnings (a multiple justified by its growth rate & moat)

$MELI boasts an expansive growth traj[...]

ectory, 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 $1856💵 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 $1,700💵 (~9% below today’s price) where I can reasonably expect ~14% CAGR while assuming a 36x 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 𝐢𝐧 𝐭𝐡𝐢𝐬 𝐭𝐰𝐞𝐞𝐭 𝐡𝐚𝐬 𝐛𝐞𝐞𝐧 𝐨𝐛𝐭𝐚𝐢𝐧𝐞𝐝 𝐟𝐫𝐨𝐦 𝐬𝐨𝐮𝐫𝐜𝐞𝐬 𝐛𝐞𝐥𝐢𝐞𝐯𝐞𝐝 𝐭𝐨 𝐛𝐞 𝐫𝐞𝐥𝐢𝐚𝐛𝐥𝐞, 𝐛𝐮𝐭 𝐢𝐬 𝐧𝐨𝐭 𝐠𝐮𝐚𝐫𝐚𝐧𝐭𝐞𝐞𝐝 𝐚𝐬 𝐭𝐨 𝐜𝐨𝐦𝐩𝐥𝐞𝐭𝐞𝐧𝐞𝐬𝐬 𝐨𝐫 𝐚𝐜𝐜𝐮𝐫𝐚𝐜𝐲. - Dimitry Nakhla | Babylon Capital® tweet

⁠Dimitry Nakhla | Babylon Capital®
Tomorrow I will be sharing an updated valuation analysis on $MELI 📈

Believe it or not, $MELI trades for a similar valuation today as it did 5 months ago when it traded for ~$1,700 🤯

5 months ago I stated:

“I consider $MELI a strong buy closer to $1,700💵 (~9% below today’s price) where I can reasonably expect ~14% CAGR while assuming a 36x end multiple, ensuring some margin of safety”

Since reaching my $1,700 target $MELI shares have rallied +46%✅

As I suggested in the post attached below👇🏽

“$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 $1856💵 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 $1,700💵 (~9% below today’s price) where I can reasonably expect ~14% CAGR while assuming a 36x end multiple, ensuring some margin of safety”
____

While a rapid appreciation in share price can be gratifying, it's often counterintuitive for long-term investors

Ideally, I prefer to see these high-quality businesses trade at attractive valuations for an extended period, allowing for the accumulation of shares at a more favorable price

This enables us to build a larger position in a company we believe in, ultimately increasing our potential for long-term returns - Dimitry Nakhla | Babylon Capital®
tweet

⁠Dimitry Nakhla | Babylon Capital®
RT @Luke__Stan: @DimitryNakhla Thanks for taking the time to share such thoughtful and detailed comments! I'm definitely going to take some time to reflect on what you said and think more deeply about my trading strategy.

BTW, your posts have been incredibly helpful—not just to me, but to all your followers.
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AkhenOsiris
NVDA should save some money and do a RIF on their sales force focused on foreign sales. The US Gov't is now the de facto seller of NVDA GPUs.
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AkhenOsiris
RT @lokoyacap: The shiv move would be waiting until midday to cut the tariffs after everyone spends all night saying nothing real happened
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⁠Wall St Engine
Today's Key Events (All EST) — 05/13/2025

05:00: Trump at Saudi State Visit
06:00: US NFIB Business Optimism Index x
08:30: US CPI
08:55: US Redbook YoY

Before Open 👇
04:30: $JD
05:00: On Holding AG $ONON
05:00: Tencent Music Entertainment Group $TME
06:30: Sea Limited $SE
06:55: Under Armour $UAA
07:00: CyberArk $CYBR
07:25: Honda Motor Co $HMC
07:05: Silicon Laboratories $SLAB
07:10: Camtek Ltd. $CAMT
07:30: Legend Biotech Corporation $LEGN
07:30: Landstar System, Inc. $LSTR

After Hours 👇
16:00: Gevo Inc $GEVO
16:00: Vaxart, Inc. $VXRT
16:00: Exelixis, Inc. $EXEL
16:05: Oklo Inc. $OKLO
16:05: GRAIL Inc. $GRAL
16:05: CAE Inc. $CAE
16:15: Nu Holdings Ltd. $NU
16:15: Evolution Petroleum Corp. $EPM
16:15: KinderCare Learning Companies, Inc. $KLC
18:15: Danaos Corp. $DAC
19:00: Karman Space & Defense $KRMN
20:35: Smart Sand, Inc. $SND
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⁠Wall St Engine
SOFTBANK VISION FUND POSTS FY LOSS

SoftBank’s Vision Fund swung to a ¥115B ($778M) pretax loss for the fiscal year ended March, reversing a ¥128B profit a year earlier. Gains from Didi and Coupang were offset by sharp markdowns in names like AutoStore, and overall investment gains dropped 40% Y/Y.

SoftBank remains deep in the AI race — backing OpenAI with $30B and committing to acquire Ampere for $6.5B. It’s also a partner in Trump’s Stargate AI infra push. Still, SoftBank shares are down 17% YTD.
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⁠Wall St Engine
Pres. Trump has officially landed in Saudi Arabia for his 1st overseas trip this term. He was welcomed in Riyadh by Crown Prince Mohammed bin Salman. He is expected to push for investment deals, w/ regional geopolitics & economic ties also on the agenda.

https://t.co/qUJZcBCQbQ
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⁠Wall St Engine
Nissan plans to cut its number of vehicle production plants from 17 to 10 and is holding off on its full-year profit forecast due to U.S. tariff uncertainty. The company’s results are expected to reduce Renault’s Q1 net income by about €2.2 billion.
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⁠Wall St Engine
CHINA REMOVES BAN ON BOEING $BA DELIVERIES AFTER US TRADE TRUCE https://t.co/Du2eFnvzcj
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⁠Wall St Engine
Following the US-China tariff truce, Chinese rare-earth exporters are still waiting to hear whether they can resume sales to the US. Neither side has confirmed if Beijing’s export controls—adde.d Apr 4—have been lifted. - BBG
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