MercadoLibre ($MELI) – Market overreaction to the results? 📉

Yesterday $MELI released quarterly results, after which the stock initially dropped.

Personally, I view this reaction as short-term and significantly exaggerated. I used the dip to increase my position at a price of 1,636 USD. My total exposure to $MELI now represents approximately 2.2% of my portfolio, with an average purchase price around 1,700 USD.

My target price remains 2,500 USD.

Results vs. expectations:

The numbers themselves were, in my view, very solid. Revenues reached approximately 6.05 billion USD, which beat expectations of around 5.89 billion USD. EPS came in at approximately 9.74 USD, significantly above the consensus of around 8.52 USD.

The company also continued to show strong growth:

- GMV (Gross Merchandise Volume) grew year-over-year by approximately 17%

- Payment volume through Mercado Pago grew year-over-year by about 38%

Fundamentally, this was not a weak quarter. The market's negative reaction, in my view, was mainly caused by concerns about:

- temporarily weaker margins,

- higher operating costs,

- continued aggressive investments in logistics and the fintech segment.

Why I think the market reaction is exaggerated:

The company continues to deliver:

- strong revenue growth,

- expansion of the fintech ecosystem,

- rapid growth in payments,

- high user activity,

- a dominant position in Latin America.

The current pressure on profitability, in my opinion, is mainly related to investments in future growth. I don't see a structural problem with the business here, but rather a short-term squeeze on margins.

Comparison with competitors:

Compared to global competitors:

$AMZN dominates globally but operates in much more mature markets.

$SE has exposure to emerging markets but considerably less stability.

$PYPL is strong in payments, but lacks the strength of an integrated ecosystem.

$BABA faces significantly higher geopolitical and regulatory risks.

What makes $MELI unique is the combination of:

- e-commerce,

- fintech,

- logistics,

- digital payments,

- lending

within a single, highly integrated ecosystem.

Main positives:

Dominant position in Latin America, strong Mercado Pago growth, expanding logistics infrastructure, long-term digitalization trend, strong network effects

Latin America still has relatively low penetration of e-commerce and digital payments compared to developed markets, which leaves a lot of room for further growth.

Risks:

Currency volatility in Latin America, political and regulatory uncertainty, margin pressure due to investments, higher valuation compared to traditional retailers, competition from Amazon and local players

It is definitely not a low-volatility stock.

My view:

In my opinion, the market is currently too focused on short-term profitability swings and is overlooking the much more important long-term picture. I see this as another case where a quality growth company is being punished in the short term for aggressive investments into future expansion.

Historically, similar situations have often created interesting opportunities.

My position:

Last purchase: 1,636 USD

Average purchase price: ~1,700 USD

Weight in portfolio: 2.2%

Target price: 2,500 USD

In my view, the outlook for $MELI remains bullish for now.

How do you view MercadoLibre's results?

You'll find the English version of this post on my eToro profile. If you'd like to follow me there or possibly copy my USD portfolio, I'd be glad!