MercadoLibre (MELI) is trading down 6% after the earnings report yesterday but I believe the report was very good.

The negative market reaction is perhaps due to two factors:

1. Their fintech arm is growing its credit card portfolio, which requires significant upfront investment and impacts short-term margins. However, it's a strategic move for long-term gain.
2. They started offering free shipping for Mercado Plus subscribers in Brazil, which also hurts short-term profit margins (from delivery costs). This move will definitely lead to long-term growth in gross merchandise volume.

An incredible metric is that their active customers are not just growing rapidly, but actually accelerating this quarter.

They are also trading at a price to sales of 5 versus its average ratio around 10.

Meli is taking the route of making sure long term intrinsic value is maximized, though Wall St are less patient, so upset they martins came down. It is unwise to sell a diamond whilst dusty, but they usually better to buy at that time. You can wipe the dust off after handing the cash over.

- Manlobbi

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