Latin American E-Commerce Play VTEX Stock Down 88% but Looks Set to Rebound

VTEX Driving E-Commerce in Latin America

The enterprise e-commerce solutions market is extremely competitive and dominated by major U.S.-based providers. These providers help companies build their e-commerce presence.

Tailwinds in the e-commerce segment will remain strong as more sellers and buyers venture online. The growth is especially high in emerging markets as more people there use smartphones to make online purchases.

One geographical area that has great promise in this context is Latin America. To play the e-commerce growth there, investors might want to consider shares of VTEX (NYSE:VTEX).

The company’s cloud platform is used by various businesses to market and sell their products. VTEX currently serves more than 3,200 active online stores in more than 38 countries. (Source: “About Us,” VTEX, last accessed September 8, 2022.)

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The company got its big break in 2007 when it became the e-commerce platform in Brazil for Walmart Inc (NYSE:WMT).

Brazil and the rest of Latin America are the key regions for VTEX. The area has a total population of roughly 616.7 million, so it’s significant and can provide immense opportunities for the company.

CountryPopulation
Brazil204.3 Million
Mexico121.7 Million
Colombia46.7 Million
Argentina43.4 Million
Peru30.4 Million

(Source: “Latin America Population 2022,” World Population Review,” last accessed September 8, 2022.)

VTEX stock has been sliding down, along with the rest of the small growth technology stocks. As of this writing, the company’s shares are trading just above $4.00. That’s well below the stock’s initial public offering (IPO) price of $19.00 and its record $33.36, which was reached in August 2021.

Given the significant price deterioration, the risk/reward opportunity in VTEX stock is compelling.

Chart courtesy of StockCharts.com

VTEX Is on Strong Revenue Runway

VTEX only has three years of reported financial results, but the numbers have been healthy and the company’s outlook is bullish.

VTEX’s revenues ramped up from $61.3 million in 2019 to $98.7 million in 2020 and $125.8 million in 2021. (Source: “VTEX (VTEX),” Yahoo! Finance, last accessed September 8, 2022.)

Moreover, the company produced earnings before interest, taxes, depreciation, and amortization (EBITDA) and generally accepted accounting principles (GAAP) profits in 2019 and 2020, prior to experiencing weakness in 2021.

Analysts estimate that the company will report revenue growth of 26.7% to $159.4 million in 2022 and 27.6% to $203.4 million in 2023.

While the company will likely not be profitable again for several more years, its losses are expected to narrow. Look for VTEX to report an adjusted loss of $0.32 per diluted share for this year and an adjusted loss of $0.13 per diluted share for 2023.

The most important thing for VTEX at this early stage of its development is for the company to ramp up its revenues and grow its business presence. The company’s cash of $254.8 million on its balance sheet should allow it to do that.

Analyst Take

VTEX stock could be a fabulous way for investors to play the e-commerce market in Latin America. Wealth in the emerging market is on the rise, and this should be supportive for the e-commerce sector.

In my view, VTEX stock’s recent major price deterioration presents a good opportunity for contrarian investors.