In 1994, Jeff Bezos drove a rented Honda Accord from New York to Seattle, handwriting the business plan for Amazon in the passenger seat while his wife drove. The book operation he launched out of a Bellevue garage would end up far less interesting than the infrastructure underneath it. The warehouse network, the payment rails, the logistics technology he was quietly assembling etc. Bezos understood something his critics did not. He knew that the store was just the the front door to get everyone into the building.
Marcos Galperin saw the same thing from Buenos Aires in 1999, and he has been building the same type of structure ever since, across a continent where the opportunity is arguably larger, and where the competition for that infrastructure has been, until recently, considerably thinner.
MercadoLibre (MELI) is trading near its 52-week low. The stock has fallen roughly 38% from its June 2025 peak of $2,645.
Margin compression and competition concerns have spooked enough investors to push it toward $1,639 at the time of writing.
I think the market is downplaying just how large this moat is.
What the Company Does
MercadoLibre runs the largest e-commerce marketplace in Latin America, with more than 120 million active buyers and over 600 million active listings across 18 countries. But calling it a marketplace misses the point. The company has built what amounts to a full digital financial system for a region that largely did not have one.
Mercado Pago, its fintech arm, processes payments, issues credit cards, extends loans, and manages savings for millions of people who have never set foot in a traditional bank.
Mercado Pago is working to change that.
The company also operates Mercado Envios, its own logistics and fulfillment network, and Mercado Ads, an advertising platform that monetizes the high-intent commerce traffic flowing through the ecosystem.
Each piece reinforces the others.
Someone who discovers a product on the marketplace pays with Pago, borrows through Credito if needed, receives it via Envios, and sees relevant ads the next time they log in. In other words, the loop tightens with every transaction.
In Q4 2025, reported February 24, 2026, revenue reached $8.76 billion, a 44.6% increase year over year, which is unbelievably the 28th consecutive quarter with commerce revenue growth above 30%.
Full-year 2025 revenue was $28.89 billion, up 39%.
The Investment Thesis
The secular setup is straightforward. Latin America has nearly 300 million digital shoppers today, a number forecast to grow 44% by 2029.
The Brazilian e-commerce market alone is worth $69 billion in 2026 and is projected to reach $150 billion by 2031 - a 16.9% compound annual growth rate in MercadoLibre's single largest market.
Mexico is only now approaching the kind of online retail penetration the United States had a decade ago. The entire region sits roughly 10 years behind where U.S. e-commerce was at its comparable development stage.
That gap is the opportunity, and MercadoLibre built the roads, the rails, and the payment infrastructure before most competitors arrived.
The business model is worth understanding precisely, because 'Amazon of Latin America' misses what is actually interesting about it.
The marketplace generates transaction volume and behavioral data. Mercado Envios uses that volume to build logistics density. The company now delivers more than 95% of items sold through its own network, with 48-hour delivery rates reaching 74% in Brazil. Mercado Pago monetizes the payment stream and uses purchase history to underwrite credit.
Mercado Ads converts the traffic and behavioral data into advertising revenue.
And Mercado Credito funds consumer purchasing power that flows back into higher gross merchandise volume.
Each piece feeds the others.
A seller uses the marketplace to reach buyers, Pago to collect payment, Envios to ship, and Credito to fund inventory.
The fintech story is evolving into the primary profit engine of the business. The credit portfolio grew 90% year over year to $12.5 billion in Q4 2025. Mercado Pago reached 78 million monthly active users, up 28%.
Fewer than 20% of Mexicans hold a credit card. Brazil's formal banking system left a substantial portion of the population without access to installment credit until Mercado Pago arrived. This is a greenfield financial system being built for 650 million people who needed one.
The advertising business is the part of this story that gets the least attention.
Mercado Ads grew 67% year over year on an FX-neutral basis in Q4 2025, driven by AI-powered bidding algorithms, automated campaign tools, and a demand-side platform for advertisers in China targeting the growing cross-border commerce business. Amazon's advertising segment is now one of its highest-margin revenue lines, contributing meaningfully to the company's profitability transformation.
MercadoLibre is building exactly the same lever.
High-intent commerce traffic monetized through a retail media network at a fraction of the maturity. It is early innings for a business that has demonstrated it can grow this way.
Then there is the Amazon parallel - not necessarily as a compliment but as a blueprint.
When Amazon was building its fulfillment centers in 2002, the company's operating margin was negative. Wall Street was furious and hammered them for it. In 2026, MercadoLibre is running what management has called a “deliberate 5-6% margin sacrifice” to fund free shipping thresholds, credit card expansion, and cross-border infrastructure.
The company has committed roughly $10.9 billion - in Brazil for 2026, plus $3.4 billion in Argentina.
This is not margin compression in the traditional sense, but more accurately aggressive capital deployment into a market where management has made the calculation that the returns on infrastructure investment exceed the returns on protecting near-term EPS numbers
The new buyer cohort data from the Q4 earnings call reinforces that the investment is working.
Management disclosed that new buyers brought onto the platform since the June 2025 value proposition launch - when they essentially slashed the free shipping threshold - are showing higher purchasing rates across more categories with improved retention relative to prior comparison periods.
In Brazil, GMV grew 35% year over year alongside a 45% increase in sold items. The acceleration in unit volume suggests lower prices and easier shipping are pulling new behavior from existing users. Management also reported record NPS in commerce and fintech in Brazil, Mexico, and Argentina for 2025.
I believe that these results while the stock sits 38% below its peak is exactly the kind of dislocation that tends to look obvious in retrospect.
Competition and Macro Context
Shopee is the primary risk that deserves a serious look.
Sea Limited's e-commerce division entered Brazil in 2019 with the same playbook it used to dominate Southeast Asia with low prices, gamified flash sales, seller-friendly policies, and a willingness to subsidize shipping until the market capitulates.
It has worked.
By mid-2025, Shopee had become the number one e-commerce platform in Brazil by order volume, surpassing MercadoLibre in items sold, with 85 million registered buyers and 50 million monthly active users.
When JPMorgan downgraded MELI to Neutral on March 12, 2026 and cut its price target to $2,100, Shopee was the central reason.
The competitive dynamics are worth understanding in a bit more detail though.
Shopee's stronghold is low-ticket items, with products averaging around 11% cheaper than MercadoLibre's, with lower seller fees on small-ticket transactions and free shipping thresholds calibrated to price-sensitive consumers in Brazil's Northeast, a region that MELI's logistics network historically underserved.
The gamification layer with flash sales, daily check-ins, points systems etc. is also genuinely effective at driving purchase frequency among younger, mobile-first buyers.
Shopee has demonstrated it can build a commerce-payments flywheel. It did exactly that across Southeast Asia.
MercadoLibre has responded directly.
In May 2025, MELI slashed seller fees by approximately 40% on products priced between 79 and 200 reais - exactly the segment Shopee dominated. In June, it cut the free shipping threshold from 79 reais to 19 reais, and the result was immediate, showing low-value segment sales growth that month significantly outpaced historical rates.
The platform is not sitting still. It is spending to win the segment back, which is part of why margins are under pressure.
There is also a structural argument for why Shopee's advantage in low-ticket volume does not automatically translate into an existential threat. By order count, Shopee leads. By gross merchandise value, revenue, and fintech penetration, MercadoLibre remains dominant.
Higher-ticket items like electronics, appliances, and fashion carry better economics for the platform and carry higher switching costs for buyers who need financing, reliable returns, and delivery guarantees.
MercadoLibre's Mercado Pago and Credito integration is meaningfully deeper than anything Shopee currently offers in Brazil, and a im willing to bet that a consumer who finances a $400 appliance through Credito and receives it via Envios is not moving that transaction to Shopee for a few percentage points on shipping.
Shopee is also making its own strategic pivot in response to MercadoLibre's counter-moves. It has onboarded over 800 major brands in an attempt to move upmarket and increase average selling price - which, if successful, would bring it directly into MercadoLibre's strongest territory.
This bears watching. A Shopee that moves into higher-ticket categories while retaining its low-ticket volume base would represent a more serious competitive challenge than a Shopee that wins on commodity goods.
The macro picture adds its own complications.
Currency volatility in Brazil and Argentina has historically distorted MELI's reported dollar figures. A significant devaluation in the Brazilian real or Argentine peso can compress dollar-reported numbers even when the underlying business is healthy.
Brazil's interest rates are historically elevated, which could affect the credit portfolio's funding cost and borrower quality in ways that are difficult to model from the outside.
And political instability in Argentina, while chronic, is a real drag on one of the company's important markets.
Valuation - Cheap, Fair, or Expensive?
At $1,639, MELI trades at roughly 41x trailing earnings and 31x forward earnings based on 2026 consensus estimates.
That is not a value stock multiple, but it is worth framing correctly.
The consensus price target across 24 analysts who rate the stock - with zero sell ratings - is approximately $2,607.
Even the JPMorgan bear case at $2,100 represents 28% upside from today's price.
Morningstar assigns a fair value of $3,733 to MELI based on its discounted cash flow model, citing the company's wide economic moat and long-term growth runway. The gap between Morningstar's fair value and the current price reflects uncertainty about the timeline for margin recovery - and importantly does not reflect a disagreement about whether the business is worth owning.
I believe that MELI deserves to trade at a premium.
Now the question is how much patient capital it requires to sit through a period when management is openly comfortable with lower near-term profitability.
What Could Go Wrong
The credit portfolio is the variable that could genuinely hurt.
Provisions for doubtful accounts rose 66% year over year in 2025, even as revenue grew 39%. This explains why net income grew only 4.5% despite the top-line acceleration. If MercadoLibre's loan book goes bad at scale, the fintech earnings story reverses quickly. The company is lending to many first-time borrowers in countries with limited credit history infrastructure. That is the opportunity, but it is also the risk.
Shopee is the competitive threat I take most seriously.
Sea Limited has shown the ability to subsidize losses almost indefinitely when it believes the prize justifies it. If Shopee decides to move beyond Brazil into Mexico and Colombia, MercadoLibre could find itself fighting a two-front war while simultaneously investing in infrastructure. Not an impossible situation, just a tougher spot to be in.
Currency is a structural headwind that never fully goes away. A significant devaluation in the Brazilian real or Argentine peso can compress dollar-reported numbers even when the underlying business is healthy.
Investors who are not comfortable with this kind of volatility should be honest with themselves before sizing a position.
My Take
I think MELI at $1,639 represents one of the more interesting setups in the current market.
The business is growing at 45% annually, has 28 consecutive quarters of 30%-plus revenue growth, and is deliberately sacrificing near-term margins to build infrastructure in a market that looks like the United States did about a decade ago. The consensus sees 60% upside. Even the most bearish major analyst sees 28% upside.
The next catalyst is Q1 2026 earnings, scheduled for May 6, 2026.
Any evidence that the credit portfolio's non-performing loans are stabilizing, or that Shopee's competitive intensity in Brazil is plateauing, could reset the sentiment significantly.
For an investor with a 2-3 year time horizon, I'd treat the current range of $1,600–$1,700 as a reasonable entry. The downside here is bounded by the actual business. The upside is there when a dominant platform in a high-growth market gets its margins back.
I am long MELI. I hold shares and have no plans to sell within the next 72 hours.
The Earnout Investor provides analysis and research but DOES NOT provide individual financial advice. Jamie Dejter may have a position in some of the stocks mentioned. All content is for informational purposes only. The Earnout Investor is not a registered investment, legal, or tax advisor, or a broker/dealer. Trading any asset involves risk and could result in significant capital losses. Please, do your own research before acquiring stocks.