MercadoLibre (MELI) Emulates Amazon as Latin American Takeover Continues

MercadoLibre (MELI) has become to Latin America what Amazon (AMZN) is to the U.S.—the undisputed leader in domestic e-commerce, with a wide lead over competitors. This dominance has been built on heavy investment in logistics and a powerful flywheel that combines e-commerce with fintech. The result is a self-reinforcing growth cycle, where success in one area drives momentum in the other, leading to compounding results.

So far this year, shares have performed especially well—bouncing back quickly after the dip caused by news of reciprocal tariffs from the U.S. government. The recovery has been fueled by solid top-and bottom-line growth in both fintech and e-commerce, along with rising future expectations.

Although the stock doesn’t appear cheap based on traditional valuation multiples, conservative analyst forecasts arguably justify its current price. That said, there’s limited margin of safety if MercadoLibre fails to keep outperforming.

However, I believe MELI’s exceptional fundamentals, structural advantages in Latin American e-commerce, and the growing strength of its fintech arm put it in a uniquely strong position—one where conventional metrics fall short of capturing its full potential. All things considered, I’m rating MELI a Buy.

MercadoLibre Raises the Bar Again

MercadoLibre is still on fire after releasing its Q1 2025 results on May 7, beating both top and bottom-line expectations. Of the $5.9 billion in revenue, $3.3 billion came from the e-commerce segment, while the remaining $2.6 billion was driven by its fintech arm, MercadoPago.

MercadoPago has become a significant growth engine for the company, especially on the profitability side. In the most recent quarter, its credit portfolio grew 75% year-over-year, and the number of monthly active users jumped 31%, reaching 64 million. This strong performance helped push MercadoLibre’s overall operating margin up to 12.9%, an increase of 0.7 percentage points from the year before.

But the strength isn’t just coming from fintech. The e-commerce business continues to perform impressively, despite already leading in most of its core markets. In Brazil—MercadoLibre’s largest e-commerce market, accounting for about half of the segment revenue, marketplace sales grew 19% year-over-year to $1.8 billion, raising the competitive bar even higher.

That said, the biggest surprise this quarter came from Argentina. Gross Merchandise Value (GMV) in the country surged 126% on a currency-neutral basis, as recent economic reforms appear to be supporting more vigorous e-commerce activity across the board.

Other operational highlights include user growth at the fastest pace since 2021, during the pandemic boom. The number of items sold jumped 28% to 492 million, and unique buyers reached 67 million.

In short, MercadoLibre’s growth story is still very much intact. Analysts have consistently revised revenue and earnings estimates upward for FY2025 and beyond, solidly backing the strong momentum behind MELI’s stock.

Shopee’s Making Moves but MELI Runs the Show

MercadoLibre has made solid progress—but so have its competitors, especially Sea Limited’s (SE) Shopee, which has rapidly scaled in Brazil and grabbed market share. Today, Shopee controls 8.5% of Brazil’s e-commerce market, compared to MercadoLibre’s 12.1%.

Shopee’s Gross Merchandise Value (GMV) in Brazil now stands at around $10 billion—twice Amazon’s and roughly 40% of MercadoLibre’s. In 2024 alone, Shopee added about $6 billion in GMV, matching MercadoLibre’s own expansion for the year.

No doubt, this rising threat to MercadoLibre’s market dominance deserves close attention, especially as Shopee continues to invest heavily in logistics and works to move upmarket. Currently, Shopee’s average selling price (ASP) is about $7, roughly three times lower than MercadoLibre’s $21 ASP. That highlights a limited overlap in product assortment, but it’s also what’s driving Shopee’s big gains in transaction volume.

That said, MercadoLibre arguably still reigns supreme. Shopee is still playing catch-up regarding service quality, especially on delivery speed, which remains one of MercadoLibre’s biggest strengths. And getting there won’t be cheap. Shopee must undergo several heavy investment cycles to match MercadoLibre’s logistics capabilities.

Meanwhile, MercadoLibre is far from complacent. The company recently announced a massive $5.8 billion investment in Brazil—the largest ever in the sector — representing a 48% year-over-year increase in regional investment.

The bottom line is that MercadoLibre continues to hold a key structural advantage by operating with a much higher average ticket. That kind of quality matters more than just growing transaction volume, especially if those transactions aren’t profitable or operationally sustainable. In other words, MercadoLibre’s edge is both qualitative and quantitative, driven by better monetization, stronger logistics, and more premium positioning.

Is MELI Stock Overpriced?

MercadoLibre currently trades at a seemingly stretched 51.7x forward earnings. Based on long-term EPS growth estimates of 28% over the next 3 to 5 years, that implies a PEG ratio of about 1.8x, which looks pricey but could be justified. After all, MercadoLibre isn’t just an e-commerce platform; it’s a flywheel business where fintech feeds e-commerce and vice versa, driving compounding growth that analysts may not yet be fully capturing in their models.

To better understand how the market is pricing this growth, a reverse DCF using analyst estimates for the next five years indicates top-line growth is expected to come in at a 16.5% CAGR. Given that MELI is becoming more efficient—generating more revenue per unit of cost—I’ve assumed EBIT margins will expand in line with the 28% EPS growth forecasted by the Street.

Using the last twelve months as a base for effective tax rate, CapEx, and D&A (and assuming no major shifts in working capital), MercadoLibre’s equity value would land around $142 billion. Discounting cash flows at 7.5% and applying a 3% terminal growth rate, the fair value per share comes out to roughly $2,492—about 3% below where the stock is currently trading.

Now, the point of this exercise isn’t to claim a perfect price target but to highlight that a stock trading at 51.7x earnings isn’t necessarily overvalued, at least in MELI’s case. That said, it doesn’t leave much room for error either. Still, given how consistently the company exceeds expectations (beating estimates in 8 out of the last 10 quarters), there’s a solid case that current market assumptions might be too conservative—and that MELI could actually be undervalued from that angle.

Is MercadoLibre a Buy, Sell, or Hold?

Wall Street is pretty bullish on MELI. Of the 13 analysts who have covered the stock over the past three months, 12 rate it a Buy, with just one holding a neutral view. The average price target is $2,819.55, which suggests an upside of about 8.5% over the next year.

See more MELI analyst ratings

Premium Price, But the Bull Case Still Stands

MercadoLibre is certainly no bargain at its all-time highs, but relying solely on traditional valuation metrics can give a misleading impression that the stock is overpriced.

Sure, there are challenges ahead—especially in e-commerce in Brazil, its biggest market—but MercadoLibre clearly has the stronger value proposition. It’s making e-commerce and digital payments more accessible, reliable, and efficient across Latin America in a way no other company can, which helps it attract and retain customers, giving it a real competitive edge and insulating it from much of the competition. I think the bull case holds as long as the company keeps raising the bar. And so far, there are plenty of signs that this momentum should continue.