$MELI daily pick: buy a starter on the Brazil election selloff, add $1,520 to $1,580

$MELI: I'm buying a starter in @MercadoLibre after the Brazil election selloff and I'd add $1,520 to $1,580.

As of midday today ($1,636.77):
Down 10% after Lula won a fourth term
10% below the 200-day and 33% off last October's high
Q2 revenue up 50% to $10.17B
About 29x the 2027 EPS estimate

I think the selloff is more about Brazil than the business because MercadoLibre also sells across Mexico and Argentina and it beat on EPS last quarter.

Would you buy MercadoLibre on the Brazil scare or wait for earnings next week?

Not financial advice

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Why now? Investors were set up for a Bolsonaro win and got Lula instead, so everything Brazilian sold off together. Nu fell about 25% and the Brazil ETF about 28% this morning while the S&P 500 was up. MercadoLibre fell less because it isn't only a Brazil story.

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Bear case: Brazil is still the biggest market, so a weaker real and higher taxes can hit both the marketplace and the fintech side. The stock is still about 43x this year's EPS estimate which isn't cheap. That's why I'm only starting small.

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The catalyst: Q3 results are expected around Nov 4, though the date isn't confirmed. The Street wants about $10.69B in revenue and $9.34 EPS. I care most about Brazil order growth after the election and credit quality in Mercado Pago.

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What I'd watch: a weekly close under the $1,495 May low means I'm wrong and I'd step aside. A move back over the 200-day at $1,825 tells me the panic is done. Street target is about $2,160 with 24 Buys and 9 Holds for what it's worth.

Sources: 24/7 Wall St: Brazilian stocks tumble as Lula wins surprise fourth term · IBD: Brazil stocks dive as Lula wins re-election · Invezz: MercadoLibre post-election dip · FMP: MELI quote, history, estimates, financials · Robinhood: MELI live quote

Not financial advice. For informational and educational purposes only.