Technology

MercadoLibre (NASDAQ:MELI), Sea Limited (NYSE:SE), and Block (NYSE:SQ) were all stock market darlings in the aftermath of Covid. A big reason is that each stock has big connections to commerce — MercadoLibre and Sea have large marketplaces while Block has Square terminals — and also booming digital wallet businesses.

However, each company’s stock is also off its peak. In some cases (like Block and Sea Limited), they’re off an incredible amount. Let’s look at 2025 forecasts for each company and examine where their shares could trade if they surpass earnings and revenue targets.

MercadoLibre Revenue Forecasts for 2024, 2025 & 2026

MercaldoLibre’s stock has been the least punished of this group. After seeing its stock peak at $2,020 per share in January 2021, MercadoLibre has traded down about 40% from its peak.

MercaldoLibre is also growing the strongest of this group, estimates for sales growth in 2023 still are at 31%. Looking ahead we find:

• 2024 Sales Estimates: $16.9 billion
• 2025 Sales Estimates: $20.8 billion
• 2026 Sales Estimates: $25.1 billion

If MercadoLibre hit these numbers, it would see sales growth at 22%/23%/21% across the next three years. That’s down from the recent growth the company has experienced. Its compounded growth rate in the last three years stands at a scorching 63%.

However, while sales growth may be slowing, operating leverage is taking profits up at a higher rate. Wall Street analysts project profits will rise 46% in 2024 and 42% in 2025.

If you applied MercadoLibre’s current price to its 2025 estimates, it would trade for 30X earnings with a 42% profit growth rate, which be extremely attractive. Microsoft (NASDAQ:MSFT) just announced earnings growth of 27% and trades for about 35 times trailing earnings, as a comparison.

Sea Limited Revenue Forecasts for 2024, 2025 & 2026

Sea Limited hit a peak price of $372 per share back in October 2021, and it has been nothing but carnage since. The company is trading about 88% off its peak. Sea’s stock had rebounded in early 2023 amidst hopes that cost-cutting efforts would keep the company from having to issue more equity (or debt) to finance growth.

However, unimpressive growth rates in Sea Limited’s important e-commerce division led to its stock tumbling to today’s lows. Its stock is down about 50% from where it sat in early May of this year. Let’s look at where Wall Street forecasts the company in the coming years:

• 2024 Sales Estimates: $14.3 billion
• 2025 Sales Estimates: $15.8 billion
• 2026 Sales Estimates: $16.7 billion

As you can see, sales growth in the next three years ranges from 5% to 11%. That’s a far cry from the heady growth Sea Limited experienced in the past decade. In 2021 revenue growth hit 127.5% before decelerating to 25% in 2022 and 8.4% in the last 12 months.

On the plus side, Wall Street projects pro forma profits of $2.25 billion by 2026, which would mean Sea Limited would trade for just 11X pro forma earnings at today’s share price if it delivered on expectations.

Block Revenue Forecasts for 2024, 2025 & 2026

Finally, let’s check in on revenue forecasts for Block in the coming years. It’s worth noting that the company’s revenue has been heavily driven by low-margin Bitcoin brokerage in recent years, so we’ll also need to look at profit estimates.

• 2024 Sales Estimates: $24.3 billion
• 2025 Sales Estimates: $27.6 billion
• 2026 Sales Estimates: $32.5 billion

On the profit side, Block is projected to hit $1.07 in pro forma earnings this year, but by 2026 that number is projected at $2.97 billion. GAAP numbers will be less, as pro forma earnings excludes major expenses like stock-based compensation. Backing those costs out, 2026 GAAP net income projections are $1.5 billion.

MercadoLibre, Sea Limited, and Block Stock Forecasts for 2025

At the end of the day, while every company listed above has seen significant pullbacks in their share price, they’re not alone. Other companies focusing on digital payments like Paypal (NASDAY:PYPL) and Adyen have also struggled mightily across the past year.

If you own any of these companies, the biggest near-term factors in their share prices will be:

1. Interest Rates: As long as interest rates remain at current levels, there will be less demand for companies that rely on growth. Of course, if you find interest rate expectations slowing each of these companies will ride that momentum.
2. Profit Growth: MercadoLibre has a history of producing profits (even if sometimes anemic) and it has fallen the least of the group. Both Block and Sea Limited are in a continued “prove it” mode from the market.
3. Sales Growth: Right now profit growth is more important, but in the case of Sea Limited it is easy to cut costs like marketing to show better efficiency. Harder than that is sustaining sales growth without heavy marketing of your products.

Overall, if interest rate conditions ease and MercadoLibre is able to deliver on profit projections for the next couple of years, I could see it trading back to its historical high of $2,000 per share in 2025. As I noted earlier, that would be 42% profit growth and about 30X earnings, which wouldn’t be an inconceivable price relative to comparable companies.

Both Sea Limited and Block are more speculative, but likely have more upside from today’s prices if they can deliver. If Block actually hits Wall Street projections of $2.4 billion free cash flow in 2025 (and is projecting to estimates of $3.7 billion the following year), it would likely trade closer to $100 per share, which would be about 20X the following year’s free cash flow estimates. However, I must note the level of predictability for Block is much lower than MercadoLibre.

Finally, Wall Street is projecting about $1.75 billion in free cash flow for Sea Limited in 2025. If it hit that rate and sales were sustained at about 10% growth, I would project SE stock would trade at about $80 per share. That’s about 25X free cash flow, which would feel like a fair amount for a company that’s gone through a crisis and is delivering solid sales growth and delivering on its bottom line.