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MercadoLibre shares face second biggest drop in history


By Julián Yosovitch-The Chronicler-RIPE
Tech stocks started the year off on the wrong foot. In that world, the papers of MercadoLibre are among the worst performing technology companies on the Nasdaq.

At the beginning of the year, the company has already lost about US $ 10.2 billion of market capitalization. Since its highs, registered in January 2021, accumulated losses are already around US $ 40,000 million, a figure that represents close to 90% of what Argentina owes the IMF.

Tech stocks are the ones that are suffering the most from the current market decline. At the beginning of the week, the Nasdaq had accumulated a fall of about 7%. But thanks to the recent bounce, all technology companies managed to cut losses.

In the accumulated of the year, the Nasdaq fell 3.5%, the S&P fell 1.1% and the Dow Jones lost 0.2%. The MercadoLibre shares are in the peloton of stocks that fell the most in 2022 within the Nasdaq100.

At the beginning of the week, MercadoLibre accumulated a fall of more than 21% in 2022 and was the company that lost the most within the 100 most important technology stocks in the market. But nevertheless, Thanks to yesterday’s rebound, in which MercadoLibre rose close to 10%, the stock moved out of first place and moved to sixth.

Even so, MercadoLibre shares accumulated a fall of 13.5% in 2022. The one that fell the most is Atlassia Corp (17.4%), followed by Datadog, Idexx Laboratories, Align and Zscaler, which fell between 13.6 % and 16.5%.

Stocks at a general level, and technology stocks in particular, have recently been threatened by issues of changes in the monetary policy of the United States Federal Reserve (Fed), which decided to be more aggressive in its policy and with chances of raising the rate earlier.

This generated a sharp rise in US Treasury yields. The 10-year rate was above 1.77%, its highest level in two years.

A rise in rates makes the current value of the shares lower. Therefore, a rise in rates hits technology stocks and especially growth stocks, as they are more volatile and sensitive to variations in the interest rate due to valuation issues.

In addition, after a very good 2021, with large profits, many investors decided to take profits and rotate their portfolio to other sectors, which ended up complicating the current situation in the technology market.

In this world, MercadoLibre is suffering the most adverse scenario for technology companies and although it has fallen 13.5% so far this year, from their all-time highs, the shares of the Argentine technology giant showed a loss of 47% at the beginning of the week. Thanks to yesterday’s rebound, those losses were down to 41%.

Except for 2008, never in its history has MercadoLibre faced such a corrective process. In that year, it had fallen 77% from its highs, while today, the loss is 41%.

In other words, this It is the second largest percentage drop in the history of the shares of the company led by Marcos Galperin.

Loss of market value

If we translate this adjustment into market value, MercadoLibre went from worth US $ 98.6 billion in January 2021 to US $ 58.8 billion today.

Is decir, it lost $ 39.8 billion of market capitalization in one year, or about 90% of what it owes the IMF.

Until the beginning of the week, and before the current rebound, lThe company had lost about US $ 45,500 million of market cap (market capitalization), which is the same amount that Argentina owes to the IMF.

Thanks to Bounce of the last two days, MercadoLibre gained US $ 5.5 billion of market capitalization.

In turn, if only the loss of market capitalization so far in 2022 is taken, it can be seen that MercadoLibre lost US $ 10.2 billion this 2022, going from levels close to US $ 69,000 at the beginning of the year to US $ 58,800 million.

The Mercado punished MercadoLibre after the company decided to go out and issue a greater number of shares compared to what investors were willing to validate.

In nLast November it raised US $ 1,550 million from the increase of its share capital, selling shares. With more shares, the market adjusted for price and the stock plummeted.

Analysts at Delphos Investment consider this to be a good entry point to compare MercadoLibre.

“MercadoLibre is the regional paper with the greatest global ties, since it moves along with technological innovation actions. In recent days, the action returned to the US $ 1,000 zone, where we began to see value from the point of view MercadoLibre could find itself in a flat area considering its fundamentals, leaving the only doubt remaining the sales flow that the papers of the technological innovation sector have been supporting, “they said.

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