Mercari (4385): Upgrade to Overweight: Trust and safety improvements and AI use diversifying GMV growth drivers
Report Coverage
Report Summary
JPMorgan upgrades Mercari from Neutral to Overweight, raising its December 2026 price target from ¥3,200 to ¥5,000 based on a 23x P/E multiple applied to FY6/27 EPS estimates. The upgrade reflects accelerating GMV growth across the marketplace business since FY6/26, with growth drivers diversifying beyond trading cards and entertainment/hobbies into apparel, supported by trust-and-safety improvements (Safe Appraisal service, anti-resale measures) and AI-driven product recommendations. In fintech, AI-based credit screening is enabling transaction volume expansion while maintaining contained credit risk, and management is increasingly focused on strengthening the capital base.
Key Takeaways
- JPMorgan projects a 12% core operating profit CAGR for Mercari over FY6/27 to FY6/29, above the industry-average growth rate of 10.4%, justifying a premium P/E multiple of 23x versus the sector average of 21.1x.
- GMV growth drivers are diversifying beyond the volatile trading card segment, with apparel GMV accelerating from 1.5% YoY in 1Q to 15.3% in 3Q FY6/26, and expected to reach 34% of domestic GMV by FY6/29.
- The Safe Appraisal authentication service and AI-powered home screen redesign are improving trust, increasing average order values, and extending user engagement time on the platform.
- Mercari’s fintech business is growing credit receivables while maintaining high collection rates through AI credit screening, with revolving credit comprising 68.2% of the credit balance, reflecting a unique buy-resell-repay ecosystem.
- The US marketplace business is accelerating in top-line growth with a targeted GMV CAGR of 16.1% over FY6/27-FY6/29, but remains in an investment phase with core operating profit expected near breakeven.
- Retained earnings are expected to turn positive in FY6/26, and management’s growing attention to the capital base suggests higher shareholder returns are likely over the medium term.
Why This Report Matters
Mercari’s upgrade signals that the company is successfully reducing its reliance on speculative trading card demand by broadening GMV growth into apparel through operational improvements and AI, while its fintech arm scales profitably with contained credit risk.
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