Bulls, Run Free With MercadoLibre

A direct comparison to the U.S. e-commerce names today is not completely appropriate because Latin America is in a much earlier phase of the growth and adoption curve for that business. I view MELI as being comparable to eBay, Amazon and PayPal in 1998, not 2007. Why is this important? Earlier-stage growth companies get (and deserve) higher multiples.

The value of MercadoPago is becoming increasingly clear. eBay paid $1.5 billion in 2002 for PayPal. With MELI's current market cap of only $1.8 billion, you are getting the Latin eBay and Amazon for only $300 million. I find that risk/reward scenario more than appealing.

Let me emphasize how incredible and important it is that this company is already profitable. Remember back in the ol' days of the American Internet craze, when high-flying Internet stocks were bleeding money but promising profits years down the road? This is not the case with MELI. It's profitable now and doesn't need to make starry-eyed forecasts.

Also, the fuel that will drive the stock higher is the simple fact that the forward numbers are too low. Don't outthink this; when estimates rise, it's a safe bet that stock prices will rise as well.

Finally, and a bit on the lighter side: How can any true, cold-blooded cutthroat capitalist not be enamored of the stock of a company named MercadoLibre (which means "free market" in Spanish, for our linguistically challenged readers)? Viva the free markets!

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Patrick Schultz is a research associate at TheStreet.com. In keeping with TSC's editorial policy, he doesn't own or short individual stocks. He also doesn't invest in hedge funds or other private investment partnerships. He has previously obtained Securities licenses under the NASD?s Series 7, Series 24, Series 52, and Series 63 exams and has worked in the financial markets on various trading desks in addition to trading for his own account. Schultz appreciates your feedback; click here to send him an email.