Which Internet Stock Is the Best Jan 2024 Pick: Match Group, Inc. (MTCH) vs. MercadoLibre, Inc. (MELI)

NASDAQ: MELI | MercadoLibre Inc. News, Ratings, and Charts

MELI – With demand for online services skyrocketing, the internet industry’s prospects remain favorable. In this context, which internet stock, Match Group (MTCH) or MercadoLibre, Inc. (MELI), holds the potential for superior returns this month? Keep reading to find out….

The positive long-term prospects of the internet industry are driven by the upswing in online engagements and the swift progress achieved in 5G technology. Considering this, in this piece, I have assessed the fundamentals of online dating service provider Match Group, Inc. (MTCH) and internet retailer MercadoLibre, Inc. (MELI) to determine which is the better buy.

Since 2018, an average of 900,000 individuals have joined the online community daily. As of 2023, the global count of active internet users surpassed 5.30 billion, constituting 65.4% of the world’s population. As we progress through 2024, this figure is expected to increase further, and by 2025, it is anticipated to reach an impressive 6.54 billion.

This surge is driven by a combination of factors, including the enhanced affordability of smartphones and mobile data. Additionally, the rising popularity of online services, such as e-commerce, streaming video, and social media, contributes significantly to this upward trend.

Moreover, in the coming years, the number of internet users may see a significant increase attributed to the advancements brought about by 5G technology.  For instance, The United States has achieved significant progress toward implementing its national 5G network, paving the way for the adoption of the next major mobile broadband standard.

With 5G providing peak data rates up to 20 times faster than 4G and boasting a network connection density ten times greater than its predecessor, it creates considerable opportunities for innovation, economic expansion, and an improved consumer experience.

Forecasts indicate these advancements will contribute approximately $1.50 trillion to the U.S. Gross Domestic Product (GDP) by 2025. Meanwhile, the global 5G services market size is poised to grow at a staggering CAGR of 59.4% from 2023 to 2030. With the appeal of faster internet, the industry should thrive in the upcoming years.

In light of such solid growth projections, both MTCH and MELI stand to benefit. However, in terms of price performance, MTCH appears to have outshined MELI. Over the past month, MTCH’s shares soared 7.4% to close the last trading session at $35.86. In contrast, MELI’s shares plunged 9.2% during the same period to close the last trading session at $1,500.

However, to find out which Internet stock is the better pick, let us dig deeper into the fundamentals of the featured stocks. 

Recent Developments

On November 14, 2023, MTCH revealed its safety feature, “Are You Sure?” (AYS?) will be extended to millions of users across various platforms by the end of 2023. AYS? functions as an anti-harassment feature, prompting users to reconsider before sending messages.

It issues real-time warnings about potentially harmful language, using automated tools to detect offensive content. The sender is then alerted and encouraged to review and edit the message before sending it.

Conversely, on November 24, 2023, MELI announced that the month of November 2023 saw a 39% surge in sales compared to the same period in 2022, fueled by the impact of Black Friday. Moreover, electronics sales, particularly in cell phones, notebooks, and TVs, experienced a remarkable year-over-year growth of 140%.

Recent Financial Results

MTCH’s total revenue for the fiscal third quarter (ended September 30, 2023) increased 8.9% year-over-year to $881.60 million, while its operating income rose 15.6% from the year-ago value to $243.56 million. Moreover, the company’s attributable net earnings amounted to $163.73 million and $0.57 per share, up 27.2% and 29.5% from the prior-year quarter, respectively.

During the same period, MTCH’s cash and cash equivalents stood at $706.88 million, increasing 23.5% compared to $572.39 million as of December 31, 2022.

On the other hand, for the fiscal third quarter, which ended on September 30, 2023, MELI’s total net revenues increased 47.9% year-over-year to $1.99 billion, while its net income and EPS rose 178.3% and 179.7% from the prior-year quarter to $359 million and $7.16, respectively.

However, during the same period, the company’s total current liabilities stood at $10.31 billion, increasing 20.4% compared to $8.56 billion as of December 31, 2022.

Past and Expected Financial Performance

MTCH’s revenue has grown at a CAGR of 12.8% over the past three years. Street expects MTCH’s revenue and EPS for the fiscal 2024 first quarter (ending March 2024) to increase 10.2% and 40.9% year-over-year to $866.98 million and $0.76, respectively.

Conversely, MELI’s revenue has improved at a 58.5% CAGR over the past three years. Analysts predict MELI’s revenue and EPS for the first quarter (ending March 2024) to increase 35.8% and 63.9% year-over-year to $3.86 billion and $6.55, respectively.

Profitability

MTCH’s trailing-12-month gross profit margin of 70.18% is higher than MELI’s 56.61%. Likewise, MTCH’s trailing-12-month EBITDA margin of 29.38% is higher than MELI’s 18.50%. Furthermore, MTCH’s trailing-12-month net income margin of 15.42% is higher than MELI’s 7.47%

Thus, MTCH is more profitable.

Valuation

In terms of the forward EV/Sales ratio, MELI’s 5.43x is 38.9% higher than MTCH’s 3.91x. Likewise, MELI’s forward Price/Sales ratio of 5.44x is 84.4% higher than MTCH’s 2.95x. Furthermore, MELI’s forward EV/EBITDA multiple of 28.63 is 163.4% higher than MTCH’s 10.87.

Thus, MTCH is more affordable.

POWR Ratings

MTCH has an overall rating of B, which equates to a Buy in our proprietary POWR Ratings system. Conversely, MELI has an overall rating of C, translating to Neutral. The POWR Ratings are calculated considering 118 different factors, with each factor weighted to an optimal degree.

Our proprietary rating system also evaluates each stock based on eight distinct categories. MTCH has a C grade for Value, justified by its mixed valuation metrics. In terms of the forward non-GAAP PEG, MTCH’s 0.44x is 71% lower than the industry average of 1.52x. However, the stock’s forward EV/EBITDA ratio of 10.87x is 28.9% higher than the 8.43x industry average.

On the other hand, MELI’s D grade for Value is consistent with its stretched valuation metrics. In terms of the forward EV/Sales ratio, MELI’s 5.43x is 344.1% higher than the industry average of 1.22x. Likewise, MELI’s forward Price/Sales ratio of 5.44x is 502.7% higher than the 0.90x industry average.

Furthermore, MTCH’s B grade for Quality is justified by its higher-than-industry profitability. MTCH’s trailing-12-month EBIT margin of 16.62% is 105.7% higher than the industry average of 8.08%.

Likewise, MELI’s B grade for Quality is in sync with its profitability metrics. The stock’s trailing-12-month EBIT margin of 14.63% is 93% higher than the industry average of 7.58%.

Among the 55 stocks in the B-rated Internet industry, MTCH is ranked #12, while MELI is ranked #26. 

Beyond what we’ve stated above, we have also rated both stocks for Growth Momentum, Stability, and Sentiment. Click here to view MTCH ratings. Get all MELI ratings here.

The Winner

With statistics indicating a surge in internet users with each passing year, companies like MTCH and MELI are well poised to benefit. However, MTCH’s stronger financial position, higher profitability, and comparatively attractive valuation could position it as a superior investment compared to MELI.

Our research shows that the odds of success increase when one invests in stocks with an overall rating of Strong Buy. View all the top-rated stocks in the Internet industry here

What To Do Next?

Discover 10 widely held stocks that our proprietary model shows have tremendous downside potential. Please make sure none of these “death trap” stocks are lurking in your portfolio:

10 Stocks to SELL NOW! >


MELI shares were trading at $1,541.83 per share on Thursday morning, up $41.83 (+2.79%). Year-to-date, MELI has declined -1.89%, versus a -0.96% rise in the benchmark S&P 500 index during the same period.


About the Author: Anushka Mukherjee


Anushka's ultimate aim is to equip investors with essential knowledge that empowers them to make well-informed investment choices and attain sustained financial prosperity in the long run. More...


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