Bull of the Day: MercadoLibre (MELI)

MELI BABA AMZN

MercadoLibre, Inc. (MELI - Free Report) is gaining momentum as it takes on Amazon in the online shopping wars in Latin America. This Zacks Rank #1 (Strong Buy) is expected to see 46% sales growth in 2017.

MercadoLibre is the largest online commerce and payments site in Latin America. It is the eBay/Amazon of the region with websites serving 18 countries including Argentina, Brazil, Mexico, Colombia, Chile, Venezuela and Peru.

It operates MercadoLibre sites in each country as well as its online payment service MercadoPago.

Big Beat as Sales Soar

On May 4, MercadoLibre reported its first quarter results and crushed the Zacks Consensus Estimate by 32 cents. Earnings were $1.10 versus the consensus of $0.78.

Revenue soared 73.8% in US dollars and 78.9% on an FX neutral basis on strong growth in Brazil and Mexico, which grew 52.7% and 70.7%, respectively.

Sold items were up 38.6% while payment transactions through MercadoPago spiked 60.1% to 44.1 million.

In Mexico, items shipped rose 220% year-over-year to $2.6 million but gross margins fell 61.1% from 64.8% a year ago due to free Mexican shipping. Amazon recently entered the market in Mexico so the competition, especially with free shipping, is heating up.

Estimates Rise for 2017 and 2018

After the big blow out quarter, the analysts raced to raise full year 2017 and 2018 estimates.

4 estimates were raised over the last 60 days for this year which has pushed up the 2017 Zacks Consensus to $4.67 from $4.31. That's earnings growth of 34% as the company made just $3.48 in 2016.

They are also bullish on 2018 as the Zacks Consensus has jumped to $6.61 from $5.87 during the last 2 months. That's earnings growth of 41%.

Shares At Multi-Year Highs

With those kinds of numbers, is it any surprise that the shares spiked to new highs? Here's what the 5-year chart looks like.

The stock isn't cheap . It has a forward P/E of 61 so clearly you are buying it as a growth stock. However, it actually does pay a dividend, which is currently yielding 0.2%.

The company has solid cash flow as well and had $300 million cash on hand as of March 31, 2017.

Amazon (AMZN - Free Report) and Alibaba (BABA - Free Report) aren't the only games in town in online shopping. There are 650 million possible shoppers in Latin America and MercadoLibre, which was founded in 1999, was first in.

For those investors interested in owning the global leaders in e-commerce, MercadoLibre should be on your short list.

By Tracey Reniec

Source:https://goo.gl/YcsF1e

China's $500 Billion Mobile Shopping Mania

Imagine getting a soft drink from a vending machine using only your smartphone. Or scanning a QR code to buy goods from a newspaper ad.

By harnessing these innovations — and more — China mobile shopping is barreling ahead of the United States. China is still the world's largest smartphone market, even though growth is slowing. It accounts for about 30 percent of the global smartphone market, and Chinese smartphone users are expected to jump from 526.8 million to 640 million in 2018, according to eMarketer. And its shoppers are using their gadgets to snap up a wide array of goods and services.

Mint Images | Getty Images

Nearly half of all China's e-commerce sales, totaling $505.7 billion, are made with mobile devices, versus roughly one-quarter in the U.S., according to eMarketer. By 2019, China's mobile sales will account for 71 percent of those sales.

"We don't see mobile buying plateauing for the next five years," said Monica Pearl, eMarketer's director of forecasting. "They'll increase because consumer behavior has changed." Feature-rich, cheap smartphones are also helping fuel the boom, she added.

China is, after all, a mobile first market, explains Brian Buchwald, CEO of consumer intelligence firm Bomoda. So it has been able to leapfrog past other markets, which mainly used PCs for purchases.

Sophisticated mobile payment apps are partly fueling the mobile boom. To grease buying, purchases are smooth and nearly seamless, since goods are bought in a few seconds with just one click. And an intense fight for market share between payment titans WeChat Pay and Alibaba's Alipay is fueling even more innovation. Apple Pay has only just recently stepped into the competitive arena.

Meanwhile, the Chinese government has allowed a free-flowing retail and payments marketplace.

"There are no restraints," said Michael Zakkour, vice president of China/Asia Pacific practice at Tompkins International.

Alibaba’s new bid for mobile dominance inChina…

And that's good news for WeChat, A messaging app that's only five years old and is offered by the Internet giant Tencent. The app now has 650 million users. And a good chunk of them are using the app for mobile shopping. The result is that WeChat payments, along with Alibaba's Alipay, dominate the market. Because retailers can easily set up shop inside WeChat, users can plan family vacations, order a taxi or even design clothes without going anywhere else.

"WeChat is the most influential app in the world," said Buchwald. "It has the functionality of an iTunes store. So you can do anything you want."

This mobile preference is one-stop shopping for navigating a digital life. "We're talking about the emergence of chat commerce," said Lily Varón, an analyst at Forrester Research. "WeChat is becoming a commerce channel. And it's an ecosystem that's unlike anything in the U.S."

And, she adds, unlike the U.S., there's also no digital divide in China by geography or age. "It's not just limited to younger consumers," she said.

China taking shine to costly smartphones; Applegains

Meanwhile, e-commerce powerhouse Alibaba has its own Alipay app. Known as the PayPal of China, it is the dominant player in the mobile payment industry. And it's in a competitive tussle with WeChat to keep market share — fueling even more innovation.

"They're both spending billions building new features and technologies," said Buchwald. "That includes making lots of different investments in start-ups." For example, Alipay is now testing ways to let shoppers pay just by scanning a physical feature.

At the same time, Apple and Samsung are trying to break into this sector with partnerships with UnionPay, China's main bank card and payment firm.

The U.S. is lagging behind though, and mobile payments have yet to gain traction. Even QR codes, which have largely flopped in the U.S., are used everywhere in China to buy goods. And mobile phones there already have scanners embedded in them.

Once scanned and bought, goods are delivered quickly. And Alibaba, which has a massive logistics network, can get goods to customers within one day. Its ultimate goal is even loftier: deliveries to any Chinese city within 24 hours. Alibaba is even investing in drone companies, says Buchwald.

These hyperkinetic deliveries are fueling ever more purchases. Last year, China's Singles Day — a consumer shopping day invented by Alibaba and much like Black Friday in the U.S. — totaled $14.3 billion, which is 60 percent higher than 2014. Those sales total more than Black Friday and Cyber Monday sales in the U.S. combined.

Here's why US media likes China's digital market

"In China, spending as much money as possible on Singles Day is almost patriotic," said Buchwald. "It's more of a collectivist spirit there."

Emphasizing community good over the individual goes back thousands of years in China. "It's the cowboy vs. the collective," said Zakkour. "So Chinese people want to make sure that products they're buying have acceptance." For this reason, mobile commerce was predestined to become successful there, he added.

Los Angeles-based Revolve Clothing had to navigate this community spirit to sell its goods in China. "Social media there is very important," said Mike Karanikolas, co-CEO of Revolve, an online collection of up-and-coming fashion brands for men and women. "It's as if Amazon owned a big chunk of Facebook."

For the online apparel retailer, ramping up sales to the Chinese market meant navigating longer purchase cycles. Purchases in the U.S. are made quickly, he explains. But in China, purchases can take up to 30 days because many Chinese consumers spend a lot of time researching goods and then checking them out with a circle of friends before making an online purchase.

But in many ways, China's mobile mania may well be the new face of retailing.

China is up to three years ahead of the U.S. in mobile shopping, said Buchwald. "And it's moving faster than any other area of the economy. It's the future."

— By Constance Gustke 

Source: http://www.cnbc.com/2016/03/14/chinas-550-billion-mobile-shopping-mania.html

Why I'm Buying Planet Payment Hand Over Fist

Summary

• First quarter results showed impressive improvement over the year-ago period. Revenues increased 9%, and net income improved to $1.7m versus $(800k) in Q1 2014.
• Growth is being driven organically, without the need for debt or dilutive acquisitions.
• A new and expanded 5-year contract with its largest customer removes significant downside risk and leads to access to new markets.
• An ongoing stock buyback, coupled with strong cash flow and low capex requirements could lead to a substantial reduction of the share count.
• Management is likely being far too conservative with 2015 guidance, given strong Q1 results and lucrative developments currently underway.

Some of my long-time readers may have figured out by now that I have a somewhat unhealthy obsession with the payment processing industry. I love it like a fat kid loves cake. My reasoning for this is pretty simple: It's highly predictable, with recurring revenues and strong operating leverage. For that reason, it probably comes as no surprise that smaller companies in this industry have a high likelihood of being acquired, and typically for impressive premiums. However, there are only a handful of small processors that are publicly traded, and even fewer that trade at valuations attractive enough to warrant an investment. Last year, I wrote about Payment Data Systems (OTCQB:PYDS), a stock that is now up over 200%, and is still probably undervalued. Before that, it was LML Payment Systems and Digital River (NASDAQ:DRIV), two companies that would eventually be acquired for triple-digit premiums. And now, I've got my sights set on Planet Payment (NASDAQ:PLPM).

Planet Payment provides international payment, transaction, and multi-currency processing services. The company provides payment processing services that allow the authorization and settlement of payment transactions by providing the connections between the merchant, its bank, and the card association. Its multi-currency processing services, consisting of Pay In Your Currency, Shop In Your Currency, and Bank In Your Currency, are designed for customer-facing terminals, integrated front-desk systems, ATMs, and online e-commerce gateways. The company delivers its payment processing and multi-currency solutions to 70 financial services institutions around the world. Services are currently deployed at 105,000 active merchant locations in 23 countries and territories across the Asia-Pacific region, the Americas, the Middle East, Africa and Europe.

I first became interested in investing in this company late last year, after the stock had dropped precipitously from its trading range of $3-4 to about $1.50. I had known about the company for a number of years, but at that time, its valuation relative to its fundamentals was not attractive enough for me. However, over the past 6 months or so, and thanks largely to a new management team, the financials have been rapidly improving. Curiously, despite these improvements, the stock is still trading significantly below valuations it enjoyed just a few years ago. For this reason, I have continued to add to this position over the past few months, and it is now one of the largest in my portfolio.