In the midst of the post-earnings correction, Michael Burry —the legendary investor who anticipated the 2008 crisis and was immortalized in The Big Short— decided to swim against the tide of the big banks and increase his exposure to Mercado Libre (MELI).
Meanwhile, Citi, JPMorgan, Goldman Sachs, Morgan Stanley, and UBS cut their price targets, but Burry sees a historic opportunity.
The investor revealed that he increased his positions as the shares fell, arguing that the company is trading at the lowest price/sales multiples in the last decade. His ideal entry price for a strong position: "around US$1,300 per share". A clear message: the market is being too pessimistic.
Beyond MELI's quarterly earnings
It is true that the last quarter showed a net profit of US$417 million, below expectations, and that the banks reacted by cutting targets (Citi lowered to “Neutral” with US$1,950, JPMorgan to US$1,900, UBS even to US$1,750). Operating margins were also below expectations.
The correction of expectations was not limited to Citi and JPMorgan. Goldman Sachs lowered its price target from US$2,440 to US$2,100, Morgan Stanley adjusted it from US$2,600 to US$2,450, and UBS made one of the most aggressive cuts, going from US$2,050 to US$1,750.
