As markets change, MercadoLibre’s falling share price shows no company is safe.

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Downgrades big tech companies, including a slew of recent IPOs, were fueled in part by a weaker outlook. As we saw this morning with Upstartbenchmarks can outperform subsequent results when it comes to determining investor sentiment for any particular company.

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However, for one company currently on the public market for penalties, the picture is harder to make out. Mercado Libre ($SHOT), since last week’s earnings report, its value has plummeted. On May 4, MercadoLibre closed at $1,023.21 per share. On May 5, the day the company announced its first quarter results, the company’s shares closed at $913.22 a share. Yesterday, the company’s shares fell to $770.99.

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And this after MercadoLibre reported higher-than-expected revenue growth in the first quarter of 2022. Why the drop in value if the company’s recent results weren’t too bad? MercadoLibre’s comments about its market indicate that it is facing adverse conditions from a number of sources, including consumer spending, rising interest rates, foreign exchange and inflationary pressures.

MercadoLibre, a Latin American e-commerce and financial technology company, went public in 2007, making it an older public company. But its results provide a fascinating glimpse into the digital commerce and fintech industry in many Latin American countries, making its results and investor reaction incredibly important.

How so? The exchange has been tracking startup and venture capital activity in Latin America for some time now. The numbers were startling. So how their underlying market works is a critical data point; if the technology market in the region is in decline, it can slow down the growth of many start-ups and billion-dollar capital investments.

So what can we learn from MercadoLibre’s earnings report and subsequent downgrade? This is not an easy question. Let’s explore.

MercadoLibre Results for Q1 2022

In the first quarter of 2022 MercadoLibre informed net revenue was $2.25 billion, up 63% from $1.38 billion a year ago. The company’s gross exceeded the $1 billion mark, giving MercadoLibre an operating income of $139 million and a net income of $65 million. Each figure was an improvement over last year’s results.

Rapid growth and rising profits are hardly a bad combination of outcomes. So, how does MercadoLibre perform compared to expectations? Better in terms of revenue, as the street expects only $2.01 billion in revenue. However, when it came to earnings per share, the company’s earnings of $1.30 came in below the expected $1.66 per share.

In good news, Mercado’s fintech net revenue increased from $467 million in the first quarter of 2021 and $773 million in the fourth quarter of 2021 to $971 million in the first quarter of this year. The transaction rate for fintech products also rose, while total payments rose 81% year-on-year (excl. FX) to $25.3 billion and transactions grew 73% to 1.1 billion, again the same as compared to the previous year’s quarter. .

That’s a solid set of results, right? So, let’s toss a coin and look at the problems that could cause MercadoLibre’s share price to drop, and what problems this could create for Latin American startups.

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