Why It's Time to Buy MercadoLibre

If you combined Amazon.com Inc. $AMZN ( ▲ 1.31% ) with Paypal Inc. $PYPL ( ▲ 0.88% ) and Meta Inc. $META ( ▲ 2.65% ) and Alphabet Inc. $GOOGL ( ▲ 1.68% ) — and you planted it in Latin America — you’d have MercadoLibre $MELI ( ▲ 0.95% ).

And the Montevideo, Uruguay-based MELI is one whose shares you want to own — and “Accumulate” — for the long haul. It also gets us outside the U.S. market — not a bad proposition in the near term. But given the deglobalization storyline we’ve been talking with you about — leading to new “trading blocs” — the long-view outlook is alluring, too.

It’s a stock I’ve followed for a decade — having recommended MercadoLibre shares to my Private Briefing newsletter subscribers when the stock was trading at a tenth of its current price.

But don’t despair over those missed gains — because I see plenty of upside to come …

Let me show you why.

A Latin American Powerhouse

MercadoLibre is a $100 billion (market value) company that operates e-commerce and fintech businesses. It sells advertising. It operates a classified-ads business. And it offers payments services, credit and other financial-technology services through its MercadoPago fintech “platform.”

And the company operates in 18 countries across Latin America. But the key markets are:

✅Argentina.

✅Brazil.

✅Mexico.

✅Colombia.

✅Chile.

✅And Peru.

The company’s sales and profits have been surging. Its top line has nearly 10x’d over the last five years — from $2.29 billion in 2019 to more than $21 billion last year. Earnings have exploded — with earnings per share (EPS) skyrocketing from $1.67 in 2021 to $37.69 last year.

And I love MercadoLibre’s business lineup.

Packing a Punch

You folks know that I like to keep things simple. So let’s keep it that way in describing the five businesses that are driving MELI’s growth. Five businesses … like five fingers on a hand: Fold them up and you have a fist that can deliver a powerful punch.

Those businesses:

1. E-Commerce: Amazon is the e-commerce heavyweight in America. Alibaba.com $BABA ( ▲ 0.83% ) is the major player in China. And MercadoLibre's marketplace is the biggest in Latin America. And it supports millions of sellers — from international brands to family-run businesses — letting them list and sell productions online. In 2023, the “gross merchandise volume” (GMV) was catalyzed mostly by key markets like Argentina, Brazil and Mexico. And the business has sizzled — with revenue advancing at a 42% clip year-over-year. Net revenue was about $14.5 billion that year — and plenty of opportunity remains.

2. Fintech: MercadoPago — MercadoLibre’s fintech arm — provides digital payments, credit services and other financial products to merchants and consumers. More specifically, we’re talking about mobile point-of-sale (MPOS) systems, QR payments and digital wallets. In the first quarter of last year, fintech services accounted for nearly 42.5% of MercadoLibre's total revenue. That grew to nearly 45% for all of last year — or about $9.4 billion. Think of it like a PayPal player south of the U.S. border and down into the Southern Hemisphere.

3. Logistics: If you sell it, you need to deliver it and MercadoLibre’s “logistics” network is a major competitive advantage. The MercadoEnvios division handles shipping and fulfillment for the vendors who sell on MercadoLibre’s platform. MELI manages more than 90% of packages through its network, which includes fulfillment centers, cross-docking facilities and a company-owned airplane fleet — which makes possible the same next-day delivery that Amazon has grown famous for. MercadoEnvios has been — and will continue being — a major driver of MELI’s growth. In 2024, Amazon processed more than 9 billion orders; MercadoLibre, processed about 1.2 billion orders during the same period.

4. Advertising: Through MercadoAds, businesses can promote their products across the MELI platform. And the more businesses leverage its ad platform, the more its user-base grows, the more its revenue grows, and the more proprietary data gets created — which then allows for more-targeted advertising. MELI’s ad revenue zoomed from $200 million in 2019 to $1.04 billion last year. In the third quarter of last year alone, ad revenue was up 37% — reaching a penetration of 2% of GMV. MercadoLibre’s ad business has been integrating artificial intelligence (AI) technology to optimize ad placements and personalize content and targeting based on user behavior and preferences. That all sounds pretty cool — but it’s just a start: Remember, another one of those companies I compared MELI to, Alphabet, had ad revenue reach about $306 billion last year. Granted, that was aided by such gale-force tailwinds as Internet search, YouTube ads and web display ads. But it does display that there’s plenty of opportunity left for MercadoLibre.

5. Classifieds: Folks who’ve followed me for a long time — or who’ve been my friends for decades — know that I’m a lifelong motorhead. I’ve got an old Model A Ford coupe, and a Model A pickup hot rod, complete with a Mustang V-8. My son Joey has taken after me. So I’m an avid user of Facebook Marketplace. And I understand the potential for MercadoLibre Classifieds — an online-listing service for cars and trucks, real estate, and services. It’s a nice little business. It’s growing. And it’s strategic: It lets MELI reach beyond its traditional e-commerce base, to build diverse user traffic and benefit from still another source of revenue.

That Self-Sustaining Ecosystem

There’s a word I want you to take note of here — heck, write it down and remember it.

That word is “ecosystem.”

In a corporate sense, we’re talking about a company whose products, services and technologies feed into each other, leverage one another and build on each other — kind of a digital Mobius Strip that leads to great things.

Apple Inc. $AAPL ( ▲ 0.44% ) is a classic-case-study ecosystem company, with its iDevices working together in a seamless way, its App Store driving their use and its emerging “Apple Intelligence” AI technology promising to leverage all that even more.

Microsoft Corp. $MSFT ( ▲ 1.18% ) has played the same game — starting with is software, Azure Cloud services and, more recently, its augmentive AI tools.

MercadoLibre is creating a comprehensive ecosystem of its own — one that’ll drive e-commerce, advertising and financial services across Latin America. Each of the five businesses we’ve talked about here feeds into that ecosystem — driving growth in different ways.

Revenue is projected to hit $25.7 billion this year — a top-line growth stunner of nearly 25%. Profits per share are projected to reach $46.34 — a year-over-year gain of 23%.

The Double-Your-Money Outlook

I like what comes next.

Revenue is projected to grow at an average-annual rate of 25% to 30% over the next five years.

Even with the company reinvesting in that growth, profits are forecast to advance at a 20% to 25% clip during that same time frame.

At that pace, profits will double in 2.9 years to 3.6 years. And since stock prices tend to follow profits, you could be looking at a stock that goes from $2,014 right now to more than $4,000 in three years.

And you likely won’t have to wait that long to start putting money in your pocket.

Analysts at UBS just reiterated their “Buy” rating on MELI and boosted their target price from $2,400 to $2,500 — a 24% jump from where MercadoLibre shares are trading right now. As I know from my years covering big public companies and Wall Street, when analysts set these target prices, it’s usually for periods of 12 months to (maybe) 18 months.

There’s enough good “stuff” happening to ignite such a surge.

So-called “unique buyers” — an important metric for e-commerce — rose 24% in the fourth quarter.

And the growth of e-commerce across Latin America will continue for the rest of the decade: The penetration rate (folks who shop online) stands at roughly 58% today — and will reach 67% in 2029, says Statista.com.

MercadoLibre is launching Mercado Banco — its digital-banking venture — across Latin America, including Mexico. It got a $250 million seed infusion from JPMorgan Chase & Co. $JPM ( ▼ 0.45% ). And it’s going head-to-head with Nu Holdings Ltd. $NU ( ▲ 2.21% ), a digital-banking venture operating in Brazil, Mexico, Colombia, the Cayman Islands, Germany, Argentina, Uruguay and even here in America.

There’s room for both: As recently as 2021, there were about 178 million “unbanked” folks across Latin America. There are still 122 million such folks today.

MELI just last week announced plans to invest $3.4 billion in Mexico this year — with a special focus on financial services and tech products. That’s a hefty 38% jump from what it invested last year — and will lead to about 10,000 hires, mostly in logistics, fintech and administration.

That’ll bring MercadoLibre’s total Mexico employment to 35,000.

Remember what I said about deglobalization? We’ve been writing about that since we launched Stock Picker’s Corner (SPC) a year ago. And deglobalization — and the creation of those “trading blocs” — was a key part of our talk with private-equity player Mark Rossano a few weeks back.

And deglobalization will benefit MELI: Thanks to import tariffs of its own, Mexico has cracked down on shipments coming from MercadoLibre's Chinese competitors, such as Temu and Shein.

This is now on our “Watch List.” Put this on your list of companies to research. And if you like it, start an “Accumulate Strategy.”

We’ll be back with more. If you like this, please sure it with friends, family members or colleagues in your personal “network.”

That’ll help us. It’ll help your friends and family. And it’ll help you by elevating you in their esteem.

Trust me …

See you next time;