Mercado Livre Is E-commerce’s Winner in the Pandemic, Says Bradesco Bank
RIO DE JANEIRO, BRAZIL – The Mercado Livre marketplace is the big winner of the e-commerce war during the pandemic, according to Bradesco, and should draw investors’ interest after the release of its quarterly results, scheduled for the end of July.
“We believe Mercado Livre will have a much stronger quarter in Brazil than initially expected,” the bank said in a report. Mercado Livre’s overall sales are expected to rise by R$4 billion (US$800 million), more than other competitors, which are expected to raise between R$3 and R$3.5 billion more in the quarterly revenues.
Bradesco had initially questioned the competitive scenario at the start of the year. It also viewed with some concern the impact of the new WhatsApp payment system on the group’s financial branch, but the system was ultimately suspended by decisions of the Central Bank and the Administrative Council for Economic Defense (CADE).
In addition, Magazine Luiza, B2W, and Via Varejo, in deep internal restructuring, are increasingly strong e-commerce competitors. According to Bradesco, Mercado Livre reported disappointing sales on Black Friday last year and presented a poor result in the first quarter this year. However, the digital marketplace company is now back in the game.
According to Bradesco, there is a 30 percent stock growth potential, while Lojas Americanas and Via Varejo may grow 16 and 12 percent, respectively, with little potential for B2W and Magalu.
Means of payment
The acceleration of e-commerce is not the only positive impact of the pandemic for the company. Consumers have also turned to digital payment methods. That is why the bank believes the Mercado Pago division should experience a strong quarter in Argentina, where small neighborhood stores have intensified the use of digital payment methods.
The launch of PIX, the Central Bank’s instant payment structure in Brazil, could also assist the company. “We now believe that the opportunity for greater adoption of e-commerce, facilitated by PIX, is greater than the risk of new entrants,” the bank said in a report.
Accelerated race
All major e-commerce names have seen their stocks grow by over 70 percent since the start of the year. If in 2015 the Brazilian e-commerce market reached R$48.4 billion and 4.6 percent of the market, five years later the market should reach R$123.7 billion and a 9.5 percent share of sales.
In June, Bradesco alerted the market about the risks of this race. These sales acceleration – and the appreciation of stocks – should not last forever. “When the short-term euphoria surrounding the high growth rates fades, and the growth in overall sales volume inevitably slows down as stores reopen, we can see risks that these multiples could shrink,” the bank wrote in a report analyzing the multiple ratio between sales value and stocks.
At the time, Bradesco downgraded its recommendation to neutral for Magalu and B2W, owner of Americanas.com and Submarino.com. Now, in a new report, it upgraded the purchase recommendation for the Mercado Livre as well as for Via Varejo and Lojas Americanas.
With the race for the consumer’s digital pocket intensifying, the bets on who will be the winner of this dispute also increase.
Source: Exame
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