What’s Up With MercadoLibre (MELI): Spend More Now to Grow Faster Later

Stock (Symbol)

MercadoLibre (MELI)

Stock Price

$2058

Sector

Data is as of

Expected to Report

Company Description

The e-commerce products enable retail and wholesale via Internet platforms designed to provide users with a portfolio of services to facilitate commercial transactions.

The Company’s geographic coverage includes 18 countries of Latin America.

The primary offer is an ecosystem of six integrated e-commerce services: the Mercado Libre Marketplace, the Mercado Libre Classifieds service, the Mercado Pago payments solution, the Mercado Credito financial solutions, the Mercado Envios logistic solutions including shipping, the Mercado Ads advertising platform and the Mercado Shops digital storefront solution. Source: Refinitiv

Sharek’s Take

MercadoLibre is the largest online commerce platform in Latin America and gives users a portfolio of services to do commercial transactions. The company is like South America’s combination of eBay, PayPal, and Shopify rolled into one. Here’s a quick rundown of the company’s history:

• 1990’s: MercadoLibre’s founder went to college at Stanford where he made relationships to gather funding for this new endeavor which was to be the eBay of South America.
• 1999: MerdadoLibre launched in Argentina (where Internet usage there was low at the time).
• 2001: eBay took a 20% stake in MercadoLibre and the two companies and developed a working relationship.
• 2003: MELI launched its FinTech division Mercado Pago. an online payment platform that facilitates transactions on and off the marketplace.
• 2007: MELI had its IPO.
• 2013: launched Merado Enviios logistic service.
• 2016: eBay sold all its shares of MELI.
• 2017: launched Mercado Credito, a credit solution for online merchants and consumers.

Here are some business highlights from last qtr:

• Commerce — Mercado Libre: 
  • Revenue grew 33% year-over-year (YOY) in US dollars.
  • This segment was 56% of total company revenue.
  • Gross Merchandise Value (GMV) of goods sold increased 28% year-over-year.
  • Items sold grew 39% year-over-year.
  • Live Listings grew 37% year-over-year.
  • Unique active buyers grew 26% year-over-year.
  • Same-Day Next-Day Shipments increased 28% year-over-year.
• FinTech — Mercado Pago & Mercado Credito:
  • Revenue grew 49% in US dollars.
  • Segment revenue was 44% of total company revenue.
  • Total Payment Volume (TPV) grew 41% YOY.
  • FinTech Monthly Active Users grew by 29% to 72.2 million.
  • Assets Under Management grew 89% YOY to $15.1 Billion.
  • Credit Portfolio grew 83% to $11.0 billion US dollars.
    • Merchant Portfolio grew 61%.
    • Consumer Portfolio grew 71%.
    • Credit Card Portfolio grew 105%.

MELI’s numbers are exceptional, especially profit estimates for the years ahead. Analysts give the company an Estimated Long-Term Growth Rate of 32%. This company looks a lot like Amazon did when its profits began rolling in. Analysts estimate MELI’s profits to grow from ~$40 a share in 2025 to maybe $150 in 2029. MELI is a top holding in the Aggressive Growth Portfolio and Growth Portfolio. The stock is weak due to high spending and increased competition.

One Year Chart

MELI stock has been a dissapointment this year. And here you can see why. Quarterly profit growth evaporated.

The Est. LTG is 32%, same with 2QtrsAgo. That would be a nice profit growth rate.

The P/E is 34, down from 53 2QtrsAgo. But this qtr I calculated the P/E in this chart off of next year’s (2026) profit estimates because we are in the company’s Fiscal Q4.

Notice in Annual Profits that profits are expected to climb from $41 to $61 in 2026. That’s HUGE.

Quarterly profit growth is often erratic with this company. We have to accept this. It’s been that way for years.

Earnings Table

Last qtr, MercadoLibre reported 6% profit growth, and missed analyst’s expectation of 42% growth. Revenue increased 39%, year-over-year in US dollars against analyst estimates of 37%.

• Last qtr was the 27th consecutive qtr of revenue growth above 30%.
• In Loyalty, management continue to strengthen MELI+ as its user base expands. MELI+ subscriber in Brazil will be eligible for fast shipping on market place purchases — minimum of R$19 –.
• In Fintech Services, Mercado Pago credit card is one of the key drivers as total number of users in MELI’s credit portfolio surpassed 27 million. User growth was a key contributor to the portfolio’s expansion, which grew 83% year-over-year.

Here’s geographic revenue growth from last qtr:

• Brazil: +38% revenue growth yoy, 54% of total company revenue.
• Mexico: +44% revenue growth yoy, 22% of total company revenue.
• Argentina: +34% revenue growth yoy, 19% of total company revenue.
• Others: +39% revenue growth yoy, 4% of total company revenue.

Annual Profit Estimates decreased this qtr. That free shipping is taking a bite out of profits. Here’s how annual estimates it looks like:

2025: $41.07
2026: $61.36
2027: $85.12
2028: $124.35
2029: $154.80

Qtrly Profit Estimates got crushed but still show -7%, 30%, 41%, and 74% profit growth the next 4 qtrs. Analysts think MELI revenue will grow 38% next quarter.

Fair Value

I’m pricing MELI on a price-to-sales basis.

This qtr, the stock sells for 4x 2025 revenue estimates, my Fair Value is 5x 2025 revenue:

Current:
4 x $28.5billion revenue est = $104 billion market cap
$104 billion / 51 million shares = $2058

2025 Fair Value:
4 x $36.7 billion revenue est = $147 billion market cap
$147 billion / 51 million shares = $2896
Upside/Downside: +41%

2026 Fair Value:
4 x $44.6 billion revenue est = $178 billion market cap
$178 billion / 51 million shares = $3520
Upside/Downside: +71%

Bottom Line

MercadoLibre (MELI) has been a wild stock the past five years.

MercadoLibre missed profit estimates and future estimates got cut as well. But profits are expected to climb mightily in the coming quarters. The valuation is good too.

MELI ranks 8th in the Growth Portfolio and Aggressive Growth Portfolio Power Rankings.

Power Rankings

8 of 30

Aggressive Growth Portfolio

8 of 15

Conservative Stock Portfolio

N/A