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Can Mercado Livre swallow Magazine Luiza (MGLU3)?

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The segment of e-commerce is touted by many analysts and investors as the future of retail. However, at least here in Brazil, there are numerous companies operating in this segment.

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In addition to the Brazilian ones, such as Magazine Luiza 🇧🇷MGLU3🇧🇷 Via 🇧🇷VIIA3) and Americans 🇧🇷AMER3), there are foreigners, such as amazon🇧🇷 Shoppe and the biggest of all, Argentina Free market 🇧🇷meli🇧🇷

In a new episode of market makersmanager Guilherme Motta, from Studio Long Bias, with 67% profitability in 7 months, recalls that the trend is for larger companies to gain market share from smaller ones.

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“The shark eats the little fish. obvious that the Magazine Luiza is not a fish, but the most dominant company in the sector is the Free market🇧🇷 It has more balance sheet, more capacity to invest. This makes it gain market share. We are seeing this across multiple industries,” she argues.

In a report sent to customers, the Itaú BBA highlights Argentina as its favorite in e-commerce.

The recommendation to “outperform” (buy) the house reflects the company’s strong performance in the third quarter of the year, outperforming its main competitors.

Meli reported an increase in the profitability of its operations between July and September, although this is conditioned to an increase in company investments and a drop in interest rates for fintech Mercado Pago.

The fair value projected for the Free Market by Itaú BBA is $1,260/share for 2023, implying potential growth of 31%.

In Brazil, the total goods sold (GMV) on the e-commerce platform for 2022 should reach R$ 79 billion.

For 2023, the forecast is that this number will reach R$ 91 billion.

BBA projects Mercado Livre as the undisputed leader of the e-commerce segment in Brazil, holding practically a third of the market.

What else does the manager have in his portfolio?

Among retailers, Motta prefers names like Alpargatas 🇧🇷ALPA4🇧🇷 Natura 🇧🇷NTCO3🇧🇷 Renner 🇧🇷LREN3🇧🇷 Sum 🇧🇷SUM3) and Arezzo 🇧🇷ARZZ3🇧🇷

“Despite the weak GDP, what we are seeing is that Arezzo and Soma are gaining market share from the little ones. Obviously, the Stock Exchange has a link with GDP, it has a link with interest rates, but they are the best companies”, he says.

In addition, the manager has exposure to electric utilities and shopping malls, sectors considered more defensive.

“The regulation is quite effective, we have a very good assessment of it. These businesses have antifragile characteristics. If Lula goes crazy, the IPCA will be higher, but I think Iguatemi da Faria Lima will continue to be full and there will be a queue of shopkeepers wanting to get in”, he says.

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Source: Moneytimes

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