Mercado Libre Inc., the Latin American e-commerce and payments giant, fell the most in nearly two years after posting fourth-quarter earnings that fell short of analyst estimates, putting a pause on a major stock rally over the past year.

Shares slumped 13 percent Friday, the worst intraday drop since May 2022, after the company reporter earnings per share of $3.25 — about half of the $7.17 analysts had forecast. It was the first miss since at least mid-2022, according to data compiled by Bloomberg.

The lower number, which was chalked up to one-off costs and higher logistics, could prompt analysts to reduce their estimates for future earnings, Joao Pedro Soares, an analyst at Citigroup Inc. wrote in a note.

The correction comes after a mega-rally that had seen shares jump 62 percent in the past year. The firm is one of Latin America’s most valuable companies with a market capitalisation of $80 billion. It posted full year net revenue of around $14.5 billion and net income of $1.2 billion for the year. Revenue, payment volumes beat expectations for the last three months of 2023.

The company had been benefiting from a “benign” competitive scenario, which had been boosting profits, said Marcelo Ornelas, a portfolio manager at Kinitro Capital. “In this quarter, it started to invest more heavily again and the margin fell, and now they are back to normal,” he added.

Increased investments and a volatile macro environment reduce visibility for Mercado Libre’s profits in the near term, Jefferies analyst Christopher Suchecki wrote in a note to clients. While the company’s long-term story is attractive, Suchecki said it’s already reflected in the stock’s valuation.

Fellow tech giant Nu Holdings Ltd. also declined after posting results late Thursday, falling as much as 4 percent. Net income for the fourth quarter was $361 million, short of estimates of $368.4 million.

The Sao Paulo-based digital bank trailed estimates for net income but beat on other metrics including revenue, deposits and client additions. Nu had rallied more than 100 percent over the past 12 months going into the earnings release.

“While earnings were below our forecast, we note mostly positive operating trends in loan growth, gross margin expansion, and asset quality,” wrote analyst Tito Labarta of Goldman Sachs Group Inc.

Nubank, as it’s known, has attracted attention for using low-limit credit cards and user-friendly mobile apps to lure clients. The company reported 93.9 million customers at the end of 2023 with 87.8 million of them in Brazil. Nu has set a goal of trying to “win Mexico” in 2024 and doesn’t expect to break even there as it continues to invest heavily, chief financial officer Guilherme Lago said in an interview.

By Leda Alvim

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