MercadoLibre (MELI) continues to reach new all-time highs, driven by exceptional growth across Latin America’s rapidly expanding digital economy. As a leader in both e-commerce and fintech, the company once again delivered standout results in its latest earnings report, reinforcing its strong position in key markets such as Brazil, Mexico, and Argentina. With sustained momentum and a solid growth trajectory, I remain confident in MELI’s long-term potential and reaffirm my bullish position on the stock.
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E-Commerce Surge: A Marketplace Powerhouse
MercadoLibre’s e-commerce platform, Mercado Libre Marketplace, is thriving as Latin America’s go-to online shopping hub. In Q1, gross merchandise volume (GMV) hit $13.3 billion, up 17% year-over-year (40% on an FX-neutral basis), driven by 492 million items sold, marking a 27.8% jump. MercadoLibre’s push into fast-moving consumer goods and underserved markets like Mexico, where e-commerce is still gaining traction, is paying dividends.
By supercharging Mercado Envios with faster shipping and sharper pricing, the company has kept customers coming back, driving its unique active buyer count to an impressive 67 million in Q1 2025, a notable 25% jump from last year.
Argentina’s recovery has also stood out lately, with items sold rising 52% year-over-year, thanks to macro stabilization and market share gains. MELI’s ability to refine its value proposition with better shipping and financing options has solidified its edge. Brazil and Mexico also chipped in, with commerce sales climbing 30% and 23%, respectively. So, besides selling more, we are looking at MELI building a sticky ecosystem that keeps customers coming back.
Mercado Pago’s Meteoric Rise Affirms Fintech Boom
Mercado Pago, MELI’s fintech arm, is even more exciting, growing at breakneck speed, with total payment volume (TPV) soaring 43% to $58.3 billion in Q1. Fintech revenues jumped 43.3% to $2.6 billion, fueled by 64.3 million monthly active users, a 31.2% increase. The credit portfolio expanded 75% to $7.8 billion, with steady delinquency rates thanks to sharper scoring models. In Brazil, offering 120% of the CDI rate on deposits has supercharged user loyalty, positioning Mercado Pago as a digital banking leader.
Moreover, MELI’s high-yield accounts and credit cards drive cross-selling, especially in underbanked regions. Assets under management doubled to $11.2 billion, which is quite a testament to MELI’s ability to convert e-commerce users into fintech customers.
This synergy between shoppers using Mercado Pago for payments and loans creates a flywheel effect, amplifying growth across both segments. It’s no wonder most analysts are buzzing about MELI’s fintech potential as a long-term revenue driver.
MELI Eyes Value Accretion via Strategic Investments
One relatively quick way to boost valuation and market presence is to deploy cash into mergers and acquisitions. MercadoLibre’s leadership continues to double down on long-term growth, channeling significant funds into logistics and credit expansion in Q1 2025.
Despite a $10 million hit to adjusted free cash flow, investments in new warehouses and cutting-edge tech are already yielding faster delivery times and improved customer satisfaction. First-party GMV growth, for instance, was boosted by better product selection and operational efficiencies, as noted by EVP Ariel Szarfsztejn. A $2.5 billion investment plan in Mexico also boosted MELI’s e-commerce and payments presence.
While these moves pressure margins short-term, I believe they’re strategic bets on Latin America’s low e-commerce penetration, which is still under 5% of retail in some markets. Management’s focus on user experience, like faster shipping and competitive pricing, also widens its moat against rivals. In Argentina, operational tweaks and cost efficiencies have driven profitability, with U.S. dollar revenues doubling year-over-year. So clearly, these investments aren’t mindless spending but instead are building a foundation for decades of dominance.
MELI’s Pricey Yet Justified Valuation
Following its recent surge, MELI’s stock might raise eyebrows at a forward P/E of about 52. But when you dig into the numbers, it’s hard to call it overpriced. For context, net income climbed 43.6% in Q1 to $494 million, with an 8.3% margin, while EPS of $9.74 crushed estimates by 17.8%. In the meantime, consensus forecasts predict EPS growth of over 30% annually over the next few years, meaning MELI’s momentum is not expected to evaporate any time soon.
This growth trajectory justifies the premium. MELI’s operating margin held steady at 12.9%, despite heavy investments, thanks to marketing and product development efficiencies. Also, with revenue projected to grow 17.3% annually and a future return on equity of over 40%, MELI is essentially poised to grow into its valuation relatively comfortably. I would even argue it remains undervalued, given that analysts have historically been conservative with their estimates on the name.
Is MercadoLibre a Buy, Sell, or Hold?
Despite the stock’s steep post-earnings rally, Wall Street remains optimistic about MercadoLibre. MELI stock retains a Strong Buy consensus rating, with 12 analysts currently bullish and just one neutral. Not a single analyst is bearish. MercadoLibre’s average stock price target of $2819.55 indicates an upside potential of ~9% over the coming twelve months.
MELI Represents an Investment in Latin America
MercadoLibre’s Q1 performance again reminded us why it’s a standout in e-commerce and fintech. With robust growth in its marketplace, a booming fintech division, and smart investments paving the way for future gains, MELI is capitalizing on Latin America’s digital transformation.
Sure, the stock’s not cheap, but its stellar earnings growth and massive market opportunity make it a compelling hold. As the region’s digital economy evolves, I’m betting MELI will keep delivering outsized returns for patient investors.