MercadoLibre (NASDAQ:MELI) is a rapidly growing e-Commerce platform focused on Latin America, experiencing double-digit growth in gross merchandise volume and revenue. Over the past year, its stock has surged nearly 50% due to the strong e-Commerce growth in countries like Brazil and Mexico. The company is also showing healthy profitability. MercadoLibre operates in 18 countries, with a strong presence in Argentina, Brazil, and Mexico. Its gross merchandise volume in Brazil and Mexico grew by 30% year over year in the first quarter, reaching $11.4B in total consolidated volume.
In Argentina, however, the gross merchandise volume skyrocketed by 214% due to high inflation rates, which impacted item sales on the platform. Despite this, MercadoLibre generated $4.3B in net revenues in the first quarter, with a significant portion coming from Brazil. The company’s net income margin improved to 7.9% year over year, reaching $344M in net profit.
MercadoLibre’s valuation is currently at a price-to-earnings ratio of 37.8X based on FY 2025 earnings. Compared to Amazon and Shopify, MercadoLibre is growing at a faster rate, with long-term EPS estimates forecasting 27% annual growth. Considering its strong growth momentum, especially in Brazil and Mexico, MercadoLibre could potentially trade at a higher valuation, around 45.0X P/E ratio, suggesting a fair value of $2,045.
The main risk associated with MercadoLibre is the devaluation of currencies in Latin America, particularly in Argentina. If the company experiences a slowdown in gross merchandise volume growth in key markets, it could pose a challenge. Overall, MercadoLibre presents a promising opportunity for investors with its robust growth potential and profitability in the e-Commerce and Fintech sectors.