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Why Despegar.com and MercadoLibre Stock Fell Monday

Daniel Sparks, The Motley Fool
Updated

What happened

Shares of Argentina-based online travel company Despegar.com (NYSE: DESP) took a hit on Monday, falling about 12.3% as of 12:10 p.m. EDT. The stock's decline comes amid a pullback in many companies' stocks that are based in Argentina, including fast-growing e-commerce giant MercadoLibre (NASDAQ: MELI) and others. MercadoLibre stock was down about 9% Monday morning.

Bearishness toward companies in Argentina on Monday follows news that pro-business Argentina President Mauricio Macri lost a primary election over the weekend.

A chalkboard sketch of a chart with a downward-sloping arrow.
A chalkboard sketch of a chart with a downward-sloping arrow.

Image source: Getty Images.

So what

The current Argentina President received 32.1% support in a nationwide primary, compared to 47.7% support for opponent Alberto Fernandez, with most of the remaining votes going to other candidates, reported The Wall Street Journal on Monday. Nearly 100% of the ballots were counted at the time of this measurement, according to the Argentina government.

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Highlighting the uncertainty this led to for the country's economy, the peso weakened about 25% relative to the dollar on Monday morning.

Now what

Despegar has been growing nicely recently, with second-quarter revenue rising 5% year over year in on a currency-neutral basis. But revenue was down 11% as reported. MercadoLibre's top-line growth was similarly negatively impacted by currency volatility. Revenue rose 102% year over year in its second quarter on a currency-neutral basis but was up 63% as reported.

More currency volatility from this election could make business even more difficult for these companies.

The country's official presidential election is scheduled for October.

Daniel Sparks has no position in any of the stocks mentioned. The Motley Fool owns shares of and recommends MercadoLibre. The Motley Fool has a disclosure policy.

This article was originally published on Fool.com