MercadoLibre downgraded on concerns about cross

Shares of Latin American eCommerce company (NASDAQ:) declined after the stock was cut from Buy to Neutral at BofA Securities. Analysts also lowered their price objective on oanda platform downloadthe stock from $1,680 to $1,350, citing concerns about new cross-border tax rules in Brazil.

The new cross-border tax rules in Brazil exempt direct-to-consumer eCommerce purchases of up to $50 from a 60% import tariff, but impose a 17% value-added tax. Previously, all purchases were subject to import duties and value-added tax. As a result of the changes, analysts think tax arbitrage will impact a wide array of categories, including fashion.

“MELI’s Brazilian merchant base, in large part, competes with tax-exempt cross-border offers... An official $50 exemption would encourage new entrants, activate existing channels, and attract greater investment, in our view,” wrote research analysts in a note to clients.

“Bulls suggest that the implications of a $50 exemption are so detrimental to manufacturers, retailers, jobs and Brazil’s tax base that policy makers will surely reverse or attempt to address asymmetry by other means. That, however, could prove exceptionally unpopular with Brazilian voters, potentially leading officials to delay mitigation strategies until any obvious economic damage emerges, in our view,” added the analysts.

BofA expects MercadoLibre to pivot towards its own cross-border opportunities, accelerated by its Mexico successes, but the change could take time.

Shares of MercadoLibre declined by over 6% Monday morning.

Statement: The content of this article does not represent the views of FTI website. The content is for reference only and does not constitute investment suggestions. Investment is risky, so you should be careful in your choice! If it involves content, copyright and other issues, please contact us and we will make adjustments at the first time!