Latin American e-commerce and financial technology company MercadoLibre is the IBD Stock of the Day for Friday. The company's shares are hovering near a 2,202 double-bottom-base buy point, though a couple of factors could warrant caution.
Often called the Amazon of Latin America, MercadoLibre operates an e-commerce platform in Brazil, Mexico, Argentina and 15 other countries. MercadoLibre also offers Mercado Pago, a fintech business that includes a Venmo-like digital wallet popular in the region.
U.S.-listed MercadoLibre stock has significantly outperformed the S&P 500 with a 30% gain this year, likely helped by the fact that it has less exposure to American tariffs. Shares also rallied following MercadoLibre's fourth-quarter earnings report in February.
MercadoLibre Stock: Earnings Due Soon
MercadoLibre shares have rallied 5% this week, which pushed the stock above a 2,202 buy point Thursday. Shares rose 1% to close at 2,225.85 on the stock market today.
In another positive signal, MercadoLibre's Relative Strength Rating is 94 out of 99, reflecting its strong 12-month performance. MercadoLibre was also the IBD Stock of the Day pick on April 15.
However, the market remains risky and Investor's Business Daily recommends 20%-40% exposure.
Beyond that, MercadoLibre is expected to report earnings early next month and the stock has been volatile following its recent reports. Shares fell 16% following MercadoLibre's third-quarter report in November and jumped 7% following its fourth-quarter results in February.
Analysts project the company's sales will increase 26% year-over-year for the quarter to $5.5 billion, according to FactSet's tally. Adjusted earnings are projected to increase 22% to $8.27 per share.
Cantor Fitzgerald analyst Deepak Mathivanan reiterated a positive overweight call for MercadoLibre stock in an April 15 client note. He lowered his price target for the stock to 2,400 from 3,000, citing foreign-exchange changes and "credit margin moderation." However, he said there was still "plenty of runway" for MercadoLibre stock following its strong start to the year.
"The macro environment is Latin America appears to be largely stable in many countries," Mathivanan wrote. "MELI should benefit from ongoing initiatives to improve selection, user experience, and logistics in e-commerce."
MercadoLibre On Tech Leaders List
MercadoLibre was recently added to IBD's SwingTrader. It also is on the Tech Leaders and Global Leaders lists.
Meanwhile, MercadoLibre stock has a strong IBD Composite Rating of 97 out of 99, according to IBD Stock Checkup. The score combines five separate proprietary ratings into one rating.
However, MercadoLibre stock has a 21-day average true range, or ATR, of 4.8%. The average true range is a metric available on IBD's MarketSurge that gauges the characteristic breadth of a stock's behavior. Stocks that tend to make large jumps or dives in daily action have a high ATR. Stocks that tend to make more incremental moves have lower ATRs. In the current unpredictable market, IBD suggests stocks with ATRs of 3% or below.
