the collapse of Americans (AMER3) is proving to be a boon for the stock price of the Free market, which are on course for the highest for any January since the company went public in 2007.
At actions of Buenos Aires-based e-commerce and fintech retailer rose about 31% year-to-date through Tuesday, on optimism the company will gain market share after its Brazilian rival filed for bankruptcy amid to debts of R$ 43 billion.
At companies that sell products through Americanas can now question this relationship, potentially increasing Mercado Livre’s bargaining power, according to analysts at Goldman Sachs led by Irma Sgarz.
The bank’s verification channels signaled that some suppliers are already adjusting conditions for Americanas, with sellers withdrawing promotions or raising prices due to the uncertain scenario.
“We see a potential opportunity to gain market share,” Sgarz wrote in a Jan. 23 note.
The stock is also getting a boost as investors price in the end of the cycle of rising interest rates in the U.S and begin to consider a possible political change in the Argentina – the company’s second largest market, which has presidential elections in 2023 -, according to Malcolm Dorson, manager of Mirae Asset Global Investments in New York.
“Emerging market equities have been in demand, and this is a market favorite,” said Dorson, who has held MercadoLibre stock since 2019. “Earnings momentum should continue.”
Mercado Livre had already been gaining market share in Brazil even before Americanas’ problems, benefiting from years of heavy investments to develop its logistics network. For example, it was able to grow its Black Friday sales last year while most peers pulled back.
The company’s net income is expected to hit a record $3 billion in the fourth quarter, up from $2.7 billion in the third quarter, according to Bloomberg’s consensus estimate. Gross goods volume and total payments volume are expected to total US$9.4 billion and US$35.6 billion, respectively.
“When you look at global e-commerce, few players have created an ecosystem with the breadth and quality that MELI has created,” said Ignacio Arnau, manager of Bestinver Asset Management in Madrid, which has Mercado Livre as its largest position in its background. “In Brazil, they continue to pull away – and the entire Americana debacle should help them accelerate their growth and maintain their leadership position.”
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