Several fintechs from Brazil and the broader Latin America region are showing strength. MercadoLibre (MELI) is in a buy zone, while Warren Buffett-backed StoneCo (STNE) and Nu Holdings (NU) are near buy points along with dLocal (DLO), XP Inc. (XP) and PagSeguro (PAGS).
StoneCo, Nu Holdings, XP and PagSeguro are all based in Brazil, but it’s also the top market for MercadoLibre and dLocal. Brazil’s economy is on the upswing, with growth estimates increasing. A big increase in internet users and a relatively large unbanked population offer big opportunities for fintechs.
MercadoLibre, XP and DLO stock are on the IBD 50.
MercadoLibre is often described as Amazon (AMZN) of Latin America, and both are e-commerce giants. But whereas Amazon has a huge cloud-computing arm in Amazon Web services, MercadoLibre has a booming payments business.
MercadoLibre earnings surged 180% in the third quarter vs. a year earlier with revenue up 35% to $3.76 billion. Both showed faster growth than in Q2.
MELI stock blasted above the 200-day and 50-day lines in early November, fueled by the strong Q3 results. That offered an early entry. On Nov. 14, MercadoLibre stock broke out of a cup-with-handle base with a 1,398.59 buy point. Shares are still in the buy zone.
The relative strength line is at a two-year high as well, reflecting MELI stock’s outperformance vs. the S&P 500. The RS line is the blue line in the charts provided.
Javier Milei, described variously as a populist or libertarian, won Argentina’s presidential runoff Sunday. The outcome could swing Argentine stocks such as MercadoLibre.
MELI stock rose slightly early Monday.
Warren Buffett Stock: StoneCo
StoneCo offers payment solutions for small- and mid-size businesses in Brazil.
On Nov. 10, StoneCo reported third-quarter earnings surged 306% with revenue up 35% to $623.9 million. The company also announced plans to buy back $260 million worth of STNE stock.
Warren Buffett’s Berkshire Hathaway bought a StoneCo stake around the STNE stock IPO in October 2018. Priced at 24 a share, StoneCo stock rallied to 95.12 in early 2021, then crashed to 6.81 in May 2022. Since then shares have rebounded somewhat.
On Nov. 11, STNE stock gapped above its 200-day line in heavy volume on earnings, flashing an early entry. Shares have kept running up, moving toward a 14.83 cup-base buy point. Now greatly extended from the 50-day line, a handle or at least a pause would be helpful.
PagSeguro helps facilitate payments for Brazilian companies that don’t have e-commerce sites.
In Q3, PagSeguro earnings rose 18%, with growth accelerating for a second straight quarter. Sales climbed 7% to $800 million, with a steady 7% rise.
PAGS stock came public in January 2018 at 21.50 a share. With some big swings along the way, PagSeguro stock peaked at 62.83 in February 2021. Shares finally bottomed, at least for now, at 6.93 on Nov. 1.
Shares have retaken the 50-day line and are testing their 200-day. A decisive move above the 200-day line would also break a trendline going back to May, offering an aggressive entry. However, investors may want PagSeguro stock to forge a base after staging a meaning uptrend.
The Brazilian brokerage on Nov. 13 reported a 15% EPS gain in Q3, while sales growth accelerated for a second straight quarter, to 23%.
XP stock came public at 27 a share in December 2019. After the Covid crash, shares raced up to 52.94 in August 2022, then briefly topped that at 53.08 in September 2021. XP stock tumbled all the way to 10.30 in March 2023 before surging to 27.67 in late July.
Shares are now working on a 27.71 consolidation buy point, according to MarketSmith analysis. XP has reclaimed its 50-day line. A move above the Nov. 17 high of 23.92 would trigger a trendline early entry.
The Uruguayan-based cloud-based payments firm boasts two quarters of accelerating earnings and sales growth, with 50% and 59% gains, respectively, in Q2.
DLocal reports Q3 results on Nov. 21.
DLO stock came public in June 2021 at 21 a share. DLocal hit 73.43 a few months later, then came all the way down to 9.04 in May 2023. Shares have more than doubled since then.
DLO stock vaulted 32% on Aug. 16, following Q2 results and news that it had hired MercadoLibre’s CFO as its new chief executive.
Since then, shares have consolidated. DLocal stock is just above its 50-day line, and on the cusp of a trendline entry. Investors could use the Nov. 15 high of 19.35 as a specific trigger. However, buying before dLocal earnings would be highly risky.
DLO stock has a 24.22 official buy point.
Warren Buffett Stocks: Nu Holdings
Nu Holdings provides a digital banking platform, with a newly digital, significantly unbanked Brazilian population offering a rich opportunity.
Nue earnings surged to 6 cents a share in Q3 vs. 1 cent a year earlier. Revenue growth swelled 64% to $2.14 billion, picking up from Q2’s 61%.
Warren Buffett invested in Nu Holdings around its Dec. 2021 IPO, which price NU stock at 9.
Shares hit 12.24 soon after the IPO, then tumbled to 3.26 in June 2022. NU stock broke out of a long bottoming base in May 2023, then rose to 8.29 on July 13.
Shares broke out of a base with that 8.29 entry around the start of November, briefly getting extended on Nov. 14.
Shares tumbled back below the buy zone following earnings, then found support near the 50-day line. NU stock is modestly below that still-valid 8.29 buy point.
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