Bloomberg Línea — Those who at the end of 2022 bet on the shares of the two biggest Latin American unicorns listed on Wall Street have managed to reap extraordinary gains: the American Depositary Receipt (ADR) of Brazilian fintech Nubank jumped 89%, while the shares of Argentine e-commerce marketplace Mercado Libre gained 43%.
However, if we go back a little further, we can see that Mercado Libre’s share are worth 84% more today than exactly one year ago, while over the same period, Nubank’s rose 99.7%, i.e., they practically doubled.
This significant advance is part of an excellent six-month period for several of the main technology stocks listed on Wall Street. Proof of this is that the Nasdaq advanced 29% in the first six months of the year, well above the S&P500 (13.7%) and the Dow Jones (2.4%).
Far from record highs
Even with the impressive rise of these companies’ stock in 2023, their current prices are far from the highs they reached in 2021, when the super liquidity left over by central banks’ issuance due to the pandemic had generated explosions among technology companies:
Mercado Libre’s stock reached $1,965.05 on January 22, 2021 and currently cost $1,210.90, so needs to grow another 62.28% to return to its ceiling.
Meanwhile, Nubank stock cost $11.85 on December 10, 2021, when it debuted on Wall Street. Currently, each share costs 7.71%, so it would still have to rise 53.7% to return to its initial price.
A solid balance
Hours after Mercado Libre presented its balance sheet for the first quarter of 2023, Damión Vlassich, equity analyst at IOL invertironline, summarized the company’s results in the following aspects:
- The company’s numbers were more than solid, having far exceeded market expectations in terms of revenue (which totaled $3.03 billion relative to analysts’ consensus of $2.88 billion) and also managing to place above projections in terms of earnings per share (EPS)
- The company’s EPS was $3.97 when estimates were $3.04 ( a 31% increase). It also highlights the significant growth compared to the same period last year, achieving a tripling of the result obtained of $1.30 per share
- Operating income totaled $340 million, which not only represented an increase of 144% with respect to the first quarter of 2022, but also made it possible to increase margins on income from 6.2% to 11.2%. This is not something minor, since the company itself emphasized that, while Mercado Libre continues to grow its revenues, the focus is on improving operating efficiency, which will allow it to maintain long-term growth and make MercadoLibre a sustainably profitable company
Nubank: Layoffs and product development changes
With the increase in profits and profitability, Nubank has also adopted initiatives aimed at operational efficiency. In this regard, it confirmed in a statement on Wednesday the laying-off of 296 professionals, equivalent to 3.7% of the workforce of 8,049 employees at end-2022.
“The operations area was split into separate units focused on each product, which served the past period of expansion from a single product to a multi-product platform,” Nubank said in the statement. “Now, with a robust portfolio, and after a thorough analysis of models and processes, the need to consolidate the product teams into a centralized organization was identified. This will enable more comprehensive customer service and scale gains, with integrated management of all products and services,” the bank added about the layoffs.
This is a reference to the achieved phase of operational leverage, which allows Nubank to multiply revenues without having to make investments or incur expenses proportionally. As an example, in the first quarter, average revenue per active client increased by 30% year on year.
The revaluation of Nubank’s shares is, according to analysts, a reflection of the improvement in various financial and operational indicators. Profitability measured by ROE reached 43% in the first quarter of this year.
