Why MercadoLibre (MELI) Might be Well Poised for a Surge

Investors might want to bet on MercadoLibre (MELI), as earnings estimates for this company have been showing solid improvement lately. The stock has already gained solid short-term price momentum, and this trend might continue with its still improving earnings outlook.

Analysts' growing optimism on the earnings prospects of this operator of an online marketplace and payments system in Latin America is driving estimates higher, which should get reflected in its stock price. After all, empirical research shows a strong correlation between trends in earnings estimate revisions and near-term stock price movements. This insight is at the core of our stock rating tool -- the Zacks Rank.

The five-grade Zacks Rank system, which ranges from a Zacks Rank #1 (Strong Buy) to a Zacks Rank #5 (Strong Sell), has an impressive externally-audited track record of outperformance, with Zacks #1 Ranked stocks generating an average annual return of +25% since 2008.

For MercadoLibre, strong agreement among the covering analysts in revising earnings estimates upward has resulted in meaningful improvement in consensus estimates for the next quarter and full year.

The chart below shows the evolution of forward 12-month Zacks Consensus EPS estimate:

12 Month EPS

Current-Quarter Estimate Revisions

The earnings estimate of $2.11 per share for the current quarter represents a change of +329.35% from the number reported a year ago.

Over the last 30 days, the Zacks Consensus Estimate for MercadoLibre has increased 9.66% because one estimate has moved higher compared to no negative revisions.

Current-Year Estimate Revisions

For the full year, the earnings estimate of $8.26 per share represents a change of +394.61% from the year-ago number.

The revisions trend for the current year also appears quite promising for MercadoLibre, with one estimate moving higher over the past month compared to no negative revisions. The consensus estimate has also received a boost over this time frame, increasing 6.13%.

Favorable Zacks Rank

Thanks to promising estimate revisions, MercadoLibre currently carries a Zacks Rank #1 (Strong Buy). The Zacks Rank is a tried-and-tested rating tool that helps investors effectively harness the power of earnings estimate revisions and make the right investment decision. You can see the complete list of today's Zacks #1 Rank (Strong Buy) stocks here.

Our research shows that stocks with Zacks Rank #1 (Strong Buy) and 2 (Buy) significantly outperform the S&P 500.

Bottom Line

While strong estimate revisions for MercadoLibre have attracted decent investments and pushed the stock 28.2% higher over the past four weeks, further upside may still be left in the stock. So, you may consider adding it to your portfolio right away.

Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report

MercadoLibre, Inc. (MELI) : Free Stock Analysis Report

To read this article on Zacks.com click here.

Zacks Investment Research