Chicago, IL – February 26, 2025 – Zacks Equity Research shares Sprouts Farmers Market SFM as the Bull of the Day and e.l.f. Beauty ELF as the Bear of the Day. In addition, Zacks Equity Research provides analysis on MercadoLibre MELI, Amazon AMZN and Walmart WMT.
Here is a synopsis of all five stocks.
Sprouts Farmers Market offers a unique grocery experience featuring an open layout with fresh produce at the heart of the store. Headquartered in Phoenix, SFM operates more than 410 stores nationwide in 23 states.
Analysts have taken a favorable stance concerning the company’s earnings outlook, landing the stock into the highly-coveted Zacks Rank #1 (Strong Buy).
In addition to a positive earnings outlook, the company is also part of a Zacks industry that currently ranks in the top 10%. Let’s take a closer look at the company.
SFM shares have been strong thanks to robust quarterly results, with the company exceeding both consensus EPS and sales expectations in each of its last ten quarters. Up 140% over the last year, the stock has crushed the S&P 500.
Continued sales growth has pleased investors, with the company posting double-digit percentage YoY sales growth rates in each of its last three periods. Sales of $2.0 billion throughout its latest period grew an impressive 17% from the year-ago mark, reflective of a strong demand picture overall.
In addition, its existing locations continue to see an uptick in demand, with SFM posting YoY comparable store sales growth of 11.5% in its latest print, up from 8.4% in the prior period. The comparable store sales growth has regularly exceeded our expectations, with SFM posting seven consecutive beats on the metric.
Jack Sinclair, CEO, on the latest set of results – “Our teams across the business delivered on our strategy and set us up for even greater success in the future. Our unique, attribute-driven offering resonates more than ever with our target customers. They trust Sprouts as a partner on their healthy living journey, and it shows in our results. I’m grateful to our team members for their hard work, and we are excited for 2025 and the years ahead.”
Investors can implement a stellar strategy to find expected winners by taking advantage of the Zacks Rank – one of the most powerful market tools that provides a massive edge.
The top 5% of all stocks receive the highly coveted Zacks Rank #1 (Strong Buy). These stocks should outperform the market more than any other rank.
Sprouts Farmers Market would be an excellent stock for investors to consider, as displayed by its Zack Rank #1 (Strong Buy).
e.l.f. Beauty is a cosmetic company that provides makeup, lip products, nail products, cosmetics sets/kits, beauty tools, brushes, and other similar accessories. Analysts have taken a bearish stance concerning the company’s EPS outlook, landing it into an unfavorable Zacks Rank #5 (Strong Sell).
Let’s take a closer look at the company.
e.l.f. Beauty
ELF shares have been decimated over the past year, down more than 60% and widely underperforming relative to the S&P 500. Quarterly results haven’t been enough to perk shares up, with a growth cooldown driving the negative sentiment.
While sales growth is still strong, the cooldown has been the bigger story here, helping explain the sharp drop in shares. But while the growth has slowed, the margins picture has largely remained highly-positive.
Analysts' negative earnings estimate revisions, resulting from a growth cooldown, paint a challenging picture for the company’s shares in the near term.
e.l.f. Beauty is a Zacks Rank #5 (Strong Sell), indicating that analysts have taken a bearish stance on the company’s earnings outlook.
For those seeking strong stocks, a great idea would be to focus on stocks carrying a Zacks Rank #1 (Strong Buy) or a Zacks Rank #2 (Buy). These stocks sport a notably stronger earnings outlook and the potential to deliver explosive gains in the near term.
MercadoLibre, Latin America's leading e-commerce and fintech company, delivered impressive fourth-quarter 2024 results. The company reported earnings of $12.61 per share, surpassing the Zacks Consensus Estimate by 73.69% and showing a remarkable 288% year-over-year increase. Revenues reached $6.05 billion, up 24% year over year (75% on an FX-neutral basis), beating the consensus mark by 3.7%.
MercadoLibre achieved several significant milestones in 2024, passing 100 million unique buyers on its marketplace and reaching 60 million fintech monthly active users for the first time in its history. The company's total payment volume increased to $58.9 billion, up 33% year over year, while gross merchandise volume reached $14.5 billion, which grew 8% year over year (56% on an FX-neutral basis).
The company's fintech division showed particularly strong results. The credit portfolio expanded 74% year over year to $6.6 billion, with the credit card segment growing at an impressive 118% compared to the overall portfolio growth of 57%. Assets under management grew 129% to $10.6 billion, driven largely by the success of the company's yielding account.
MercadoLibre has been strategically investing in logistics infrastructure and its credit card business, which have been crucial to its growth but have occasionally pressured margins. The company set a new quarterly record of $820 million for income from operations in fourth-quarter 2024, with an operating margin of 13.5%, reflecting an improvement of 60 basis points (bps) from the prior year on a comparable basis.
Net income reached $639 million, with significant growth of 67% year over year. For the year as a whole, MercadoLibre generated $1.3 billion of adjusted free cash flow after investing $860 million in capital expenditures and nearly $3 billion in fintech funding.
The Zacks Consensus Estimate for 2025 is pegged at $25.4 billion, indicating year-over-year growth of 22.25%. The consensus mark for 2025 earnings is pegged at $45.33 per share, suggesting a year-over-year rise of 20.27%. Earnings estimates have moved north by 3.1% over the past 30 days.
Stay up-to-date with all quarterly releases: See Zacks Earnings Calendar.
Despite its strong performance, MercadoLibre faces intensifying competition in Latin America. Amazon and Walmart are expanding their presence in the region, particularly in Mexico and Brazil. This competition could potentially limit MercadoLibre's market share growth and put pressure on margins in the future.
Additionally, macroeconomic uncertainties in key markets remain a concern. While Argentina showed encouraging trends with 18% year-over-year growth in items sold during the fourth quarter, the country's volatile economic history urges caution. The company has taken measures to reduce risk in Brazil amid rising interest rates, including limiting micro card issuance and tightening payback periods for new credit issuances.
The stock has returned 38.1% over the past year, underperforming the Zacks Retail-Wholesale sector’s growth of 23.8%. The stock price rally, combined with ongoing margin pressure from strategic investments, could create better buying opportunities for the rest of 2025.
MercadoLibre currently trades at a P/E multiple of 47.24X, representing a significant premium compared to the Zacks Internet - Commerce industry average of 24.08X. This premium valuation reflects the company's market leadership and strong growth trajectory but raises questions about sustainability, especially in the face of increasing competition and potential margin pressures from ongoing investments.
While MercadoLibre demonstrates impressive operational execution and has substantial growth runways in both e-commerce and fintech, the premium valuation suggests investors might benefit from patience. The company's strategic investments in logistics and credit services position it well for long-term growth, but these investments may continue to create margin volatility in the near term.
For existing shareholders, holding the stock appears justified given the company's strong market position and growth trajectory. However, prospective investors might consider waiting for a more attractive entry point in 2025, potentially during broader market pullbacks or company-specific challenges that might temporarily impact the stock price.
MercadoLibre's disciplined approach to growth investments, robust ecosystem development, and impressive financial results make it a compelling long-term e-commerce and fintech play in Latin America, but timing remains crucial given the current valuation premium. MELI stock currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
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Amazon.com, Inc. (AMZN) : Free Stock Analysis Report
Walmart Inc. (WMT) : Free Stock Analysis Report
Sprouts Farmers Market, Inc. (SFM) : Free Stock Analysis Report
MercadoLibre, Inc. (MELI) : Free Stock Analysis Report
e.l.f. Beauty (ELF) : Free Stock Analysis Report
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