Why MercadoLibre (MELI) and Amazon (AMZN) Are Portfolio Must-Haves

NASDAQ: AMZN | Amazon.com, Inc. News, Ratings, and Charts

AMZN – Amid burgeoning online activity and escalating internet service demand, the internet industry displays significant growth prospects. Therefore, one could consider incorporating internet stocks MercadoLibre (MELI) and Amazon.com (AMZN) into their portfolio for substantial gains. Read on….

The internet industry’s optimistic long-term outlook stems from heightened online activities and rapid advancements in 5G technology. Given this backdrop, integrating internet stocks MercadoLibre, Inc. (MELI) and Amazon.com, Inc. (AMZN) into your portfolio could prove prudent.

Before delving into the featured stocks, let’s examine the dynamics of the Internet industry.

The COVID-19 pandemic has globally accelerated digital transformation beyond expectations. Profound shifts in societal behavior, such as remote work, online education, and heightened e-commerce reliance, highlight the internet’s pivotal role in shaping modern lifestyles.

In 2023, active internet users globally surpassed 5.30 billion, representing 65.4% of the global population, highlighting widespread internet adoption. Projections indicate further growth, with the number anticipated to reach 6.54 billion by 2025, emphasizing the ongoing expansion of internet connectivity.

With increasing internet penetration and smartphone utilization, consumer inclinations are gravitating towards online transactions. Forecasts suggest the e-commerce sector will soar to an impressive $8.80 trillion this year and is poised for remarkable growth to $18.81 trillion, with a 15.8% CAGR from 2024 to 2029.

Moreover, the industry’s outlook is fortified by the extensive embrace of 5G technology, delivering swifter and more dependable connectivity. Projections indicate global 5G subscriptions will exceed 5.30 billion by 2029, representing 58% of all mobile subscriptions, underscoring the global demand and adoption of this advanced technology.

In light of these encouraging trends, let’s look at the fundamentals of the two Internet stocks, beginning with number 2.

Stock #2: MercadoLibre, Inc. (MELI)

Based in Montevideo, Uruguay, MELI spearheads online commerce. It runs Mercado Libre Marketplace, facilitating seamless transactions for businesses and individuals. Additionally, Mercado Pago FinTech platform offers innovative financial technology solutions, empowering users to manage transactions effectively.

On November 24, 2023, MELI announced that its concentrated efforts for Black Friday 2023 significantly elevated sales in Brazil, surpassing expectations and expanding both sales volume and market share. Even prior to the event’s conclusion, gross merchandise volume surged by 50% to 100% compared to 2022.

Additionally, during November 2023, MELI achieved sales volume equivalent to the average of the company’s three previous Black Fridays, overcoming the stagnant growth observed in the Brazilian market throughout the peak sales season of the year. Such accomplishments position MELI favorably for continued success and market dominance.

For the fiscal 2023 third quarter that ended September 30, 2023, MELI’s increased 39.8% year-over-year to $3.76 billion. Its gross profit grew 48% from the year-ago value to $2 billion. Also, net income and net income available to shareholders per common share rose 178.3% and 179.7% from the prior year’s period to $359 million and $7.16, respectively.

MELI is set to unveil its fiscal 2023 fourth-quarter (that ended December 2023) earnings on February 22. Analysts expect the company’s revenue to increase 37.6% year-over-year to $4.13 billion for the fourth quarter.

Likewise, its EPS for the same quarter is estimated to rise 116.1% from the prior year’s period to $7.02. Moreover, the company topped the consensus revenue and EPS estimates in all four trailing quarters. Shares of MELI have gained 41.8% over the past six months and 58% over the past year to close the last trading session at $1,768.78.

MELI’s sound outlook is reflected in its POWR Ratings. The stock has an overall rating of B, which translates to Buy in our proprietary rating system. The POWR Ratings are calculated by considering 118 different factors, each weighted to an optimal degree.

MELI has an A grade for Growth and Sentiment and a B for Momentum and Quality. It is ranked #18 out of 51 stocks within the B-rated Internet industry.

In addition to the POWR Ratings I’ve highlighted, you can see MELI’s Value and Stability ratings here.

Stock #1: Amazon.com, Inc. (AMZN)

AMZN, operating both online and in physical outlets, sells consumer products, and offers advertising and subscription services. It functions across three segments: North America; International; and Amazon Web Services (AWS). Additionally, it produces and markets electronic devices to cater to diverse consumer needs.

On February 9, 2024, Owkin, a TechBio merging human and artificial intelligence, announced a collaboration with AWS to revolutionize drug discovery. The partnership would enable AMZN to strengthen its foothold in healthcare, fostering growth through expanded service utilization and technological advancements.

On January 29, 2024, Choice Hotels International, Inc. (CHH) became the first hotel company to migrate its entire system infrastructure to Amazon Web Services (AWS). This move would enable real-time response to market conditions, offering a flexible, resilient, and scalable platform. AMZN could significantly benefit by showcasing AWS’ capability, attracting more businesses to utilize its services.

For the fiscal 2023 fourth quarter that ended December 31, 2023, AMZN’s total net sales increased 13.9% year-over-year to $169.96 billion. Its operating income rose 382.6% from the year-ago value to $13.21 billion. Moreover, the company’s net income and EPS significantly grew from the prior year’s period to $10.62 billion and $1, respectively.

The consensus revenue estimate of $142.51 billion for the fiscal 2024 first quarter ending March 2024 indicates an 11.9% year-over-year increase. Likewise, the consensus EPS estimate of $0.84 for the current period reflects a 171.8% year-over-year growth. Furthermore, the company topped the consensus revenue and EPS estimates in all of the trailing four quarters.

The stock gained 25.5% over the past six months and 72.7% over the past year to close the last trading session at $169.43.

AMZN’s robust fundamentals are apparent in its POWR Ratings. The stock has an overall rating of B, which equates to Buy in our proprietary rating system.

AMZN has an A grade for Growth and Sentiment and a B for Momentum and Quality. It is ranked #5 out of 51 stocks within the Internet industry.

Click here to access additional AMZN ratings for Value and Stability.

What To Do Next?

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AMZN shares were trading at $166.76 per share on Tuesday morning, down $2.75 (-1.62%). Year-to-date, AMZN has gained 9.75%, versus a 4.41% rise in the benchmark S&P 500 index during the same period.

About the Author: Aanchal Sugandh

Aanchal's passion for financial markets drives her work as an investment analyst and journalist. She earned her bachelor's degree in finance and is pursuing the CFA program. She is proficient at assessing the long-term prospects of stocks with her fundamental analysis skills. Her goal is to help investors build portfolios with sustainable returns. More...

More Resources for the Stocks in this Article

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