We came across a bullish thesis on MercadoLibre, Inc. (MELI) on Rijnberk InvestInsights’ Substack by Daan Rijnberk. In this article, we will summarize the bulls’ thesis on MELI. MercadoLibre, Inc. (MELI)’s share was trading at $1716.38 as of Dec 18th. MELI’s trailing and forward P/E were 60.89 and 39.06 respectively according to Yahoo Finance.
An e-commerce platform displaying a wide range of products to customers online.
MercadoLibre (MELI) stands out as a transformative force in Latin America, uniquely positioned as the region’s dominant e-commerce and fintech powerhouse. With a market capitalization nearing $100 billion, MELI is not only the largest company in Latin America but also a key driver of the region’s digital revolution, operating across 18 countries with primary markets in Brazil, Argentina, and Mexico. Its leadership is underpinned by a well-executed strategy, a strong first-mover advantage, and a significant market share of 21-22% in Latin American e-commerce, placing it in an enviable position in a region where digital penetration remains at an early stage.
At the heart of MELI’s success is its robust e-commerce platform, which mirrors Amazon in its scale and strategy. By building its own distribution centers and delivery network, MELI has created a formidable competitive moat, enabling seamless operations and enhancing customer experience. Despite its impressive dominance, the growth potential remains immense, with e-commerce penetration in Latin America at just 10%, far behind the 25% seen in the U.S. This gap highlights a vast runway for growth, fueled by increasing internet access and smartphone adoption. MELI’s Gross Merchandise Volume (GMV) continues to grow in the low-twenties, and with the digital transition in the region still gaining momentum, this growth trajectory is expected to persist well into the next decade.
Complementing its e-commerce operations is Mercado Pago, MELI’s fintech arm, which has rapidly emerged as a leading digital payment ecosystem in Latin America. Mercado Pago offers a diverse range of financial services, including mobile payments, credit and debit cards, and QR-based transactions. Over the past two years, its user base has more than doubled, now exceeding 56 million active users, while Total Payment Volume (TPV) is growing at a mid-thirties percentage. In a region where cash transactions remain dominant, Mercado Pago is perfectly positioned to capitalize on the secular shift towards digital payments, which is projected to grow at a double-digit compound annual growth rate (CAGR) through 2030. Its dual leadership in both e-commerce and fintech underscores MELI’s critical role in reshaping Latin America’s economic landscape.
Despite delivering exceptional growth across all metrics, MELI’s share price has underperformed over the past year, rising just 17% over the last 12 months and 20% year-to-date, trailing the S&P 500. This underperformance has led to a modest contraction in valuation multiples, with shares now trading at 42 times next year’s earnings. While this may seem high, the company’s extraordinary growth trajectory—compounding revenues at over 20% annually and earnings per share at an even faster rate—makes this multiple appear reasonable. The resulting price-to-earnings-to-growth (PEG) ratio of 1.5x represents a 10% discount to the sector median, further supporting the argument that MELI’s long-term growth potential remains underappreciated by the market.
For long-term investors, MELI offers a rare opportunity to invest in a high-growth business with a wide economic moat and unmatched market positioning. With shares trading below $2,000, the current valuation provides an attractive entry point for a business with market-beating and multi-bagger potential. MercadoLibre remains one of the most compelling growth stories globally, poised to benefit from Latin America’s ongoing digital transformation for years to come.
MercadoLibre, Inc. (MELI) is not on our list of the 31 Most Popular Stocks Among Hedge Funds. As per our database, 87 hedge fund portfolios held MELI at the end of the third quarter which was 84 in the previous quarter. While we acknowledge the risk and potential of MELI as an investment, our conviction lies in the belief that some AI stocks hold greater promise for delivering higher returns, and doing so within a shorter timeframe. If you are looking for an AI stock that is more promising than MELI but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
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Disclosure: None. This article was originally published at Insider Monkey.