Our target price is $2,700/sh. To value MELI, we are using a blended metholodogy of 1) two-stage discounted cash flow to equity model and 2) sum-of-the-parts target mutiple. The two stage DCF yields $2,600 via a nominal perpetuity growth rate (g) of 4.7%,and cost of equity of 13.6% (the result of a 4.2% risk-free rate in dollars, 4.0% weighted country risk, 5.5% equity risk premium, and 1.0 beta). The SOTP target mutiple assumes 4.5 P/Sales multiple for e-com (implying $1,800/sh), 12x for payment (implying $400/sh) and 25x for credit ops (implying $600/sh). Our SOTP target mutiple is $2,800.

The following factors could prevent MercadoLibre's shares from achieving our target price:

1) Complex reporting. The company operates in 18 different countries and territories, with financial reporting in USD. Therefore, its financials are subject to foreign currency movements, which constitute an upside and downside risk. Important currencies for the company include the BRL, MXN, and ARS which have demonstrated meaningful volatility in the context of global currency markets.

2) Concentration. More than a half of revenues are generated in Brazil; MELI is meaningfully exposed to conditions governing the consumer environment in Brazil, which may constitute an upside or downside risk.

3) Growth expectations. Sales growth is dependent on the continuous growth of online commerce and Internet usage in Latin America, as well as the company's ability to expand its operations, to adapt rapidly to changing technologies, to capture consumer trends, to attract new customers, and to retain existing customers.

4) System stability. MercadoLibre's website is exposed to security breaches and illegal users of its services, as well as systems interruptions or failures, which may constitute a downside risk.

5) Competition with other players in the marketplace sector, acquirers, fintechs, and banks.