MercadoLibre Stock Is Up 50%—Buy, Hold, Or Sell?

Forbes

3 days ago

POLAND - 2024/11/24: In this photo illustration, the MercadoLibre company logo is seen displayed on ... More a smartphone screen. (Photo Illustration by Piotr Swat/SOPA Images/LightRocket via Getty Images) SOPA Images/LightRocket via Getty Images
MercadoLibre Inc (NASDAQ: MELI) , frequently referred to as the 'Amazon of Latin America,' runs the largest online marketplace in the region—and has consistently been increasing its market share for the last three years. Similar to Amazon (NASDAQ: AMZN) or eBay (NASDAQ: EBAY) , it provides a wide range of products from electronics to clothing to home essentials. However, a more thorough comparison would also take into account PayPal (NASDAQ: PYPL) and FedEx (NYSE: FDX) , due to their strong roles in online payments and logistics.
What truly distinguishes MercadoLibre is its robust network effect: as more sellers join, more buyers are attracted, and in turn, more buyers invite more sellers, resulting in compounded growth that fortifies its competitive edge. This trend is observable in the stock performance, which has seen an increase of approximately 50% year to date, significantly surpassing the S&P 500's 4% rise. Additionally, see – BigBear.ai: What's Happening With BBAI Stock?
MercadoLibre achieved exceptional results in Q1 2025, with revenue increasing by 37% to $5.9 billion and net income soaring 44% to $9.74 per diluted share. The gross merchandise volume rose by 40% year-over-year on a currency-neutral basis, while the number of items sold increased by 28% and unique active buyers went up by 25%. The company's fintech division was particularly strong, with total payment volume jumping 72% and monthly active users increasing by 31% to 64 million. Mercado Pago, its payments division, now manages over $230 billion in annualized volume, with more than 75% originating from outside its e-commerce platform, highlighting its influence beyond retail. Additionally, the credit portfolio grew 75%, and assets under management more than doubled, solidifying MercadoLibre's status as a leading digital financial services provider in the area.
MELI is currently trading around $2,540 per share, which corresponds to a forward earnings multiple of 45x and a forward sales multiple of 4.2x. In contrast, Amazon trades at 33x earnings and 3.1x sales, but at a significantly slower growth rate. MercadoLibre's $129 billion market capitalization still positions it as a minor player compared to Amazon's $2.25 trillion and Alibaba's $275 billion, indicating significant potential for growth.
Wall Street anticipates 30% annual earnings growth over the next four years. This projection makes its current trailing P/E ratio of 62 appear justifiable, particularly if the company can achieve those targets. In that scenario, MercadoLibre's market capitalization could exceed $300 billion within four years, even with valuation multiples compressing.
From 2021 to 2024, MercadoLibre's revenue grew at a compound annual growth rate (CAGR) of 43%, concluding last year with over 100 million buyers and 60 million fintech users—still merely a fraction of the region's 451 million adults. With increasing internet access and rising income levels, MercadoLibre is well-positioned to capitalize on the digital tailwinds in Latin America.
E-commerce penetration in Latin America remains in the mid-teens, significantly lower than U.S. levels, while cash usage is declining rapidly. In South America, cash accounted for 57% of payments in 2022; this figure has since dropped to 37% and could potentially decrease to 17% by 2030. Meanwhile, unprecedented smartphone adoption—137 million units shipped in 2024—is driving growth in mobile commerce. The e-commerce market in Latin America is projected to grow by 21% in 2025, reaching $769 billion, en route to $1 trillion by 2027—almost double its size in 2023.
MercadoLibre is leveraging multiple megatrends—e-commerce, fintech, logistics, and digital advertising—all within an underpenetrated and fast-growing region. The company reported 38% revenue growth and 90% GAAP earnings growth in 2024, and analysts expect this trend to persist moving forward. Yes, the stock is not inexpensive. And indeed, volatility is a concern, as is the case with any high-growth tech entity. Nonetheless, for long-term investors betting on digital transformation in Latin America, MercadoLibre presents a unique combination of scale, momentum, and room to grow. As with any investment, it's crucial to evaluate the pros and cons thoroughly and consider diversified options to minimize risk. The Trefis High Quality (HQ) Portfolio , featuring a selection of 30 stocks, has a history of comfortably outperforming the S&P 500 over the past four years. What accounts for that? As a collective, HQ Portfolio stocks have delivered superior returns with less risk compared to the benchmark index, providing a more stable performance, as evident in HQ Portfolio performance metrics .