MercadoLibre’s Growth Strategy Fuels Impressive Stock Performance
MercadoLibre (MELI) shares have delivered a remarkable return of 32.9% over the past 12 months, significantly outpacing the growth of the Zacks Retail-Wholesale sector at 11% and the Zacks Internet-Commerce industry at 19.3%. This strong performance reflects MercadoLibre’s dominant positioning in Latin America and a diverse business model spanning both e-commerce and fintech. Operating across 18 countries, the company continues to invest heavily in expansion while implementing strategies to counter competition and navigate macroeconomic challenges.
In 2024, MercadoLibre reached notable milestones, including surpassing 100 million unique buyers on its marketplace and achieving 60 million monthly active users in fintech for the first time in its history.
1-Year Performance
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Investment Plans in Mexico
MercadoLibre announced a significant investment of $3.4 billion in Mexico for 2025, marking a 38% increase from the previous year. This funding is targeted at enhancing technology, logistics, and fintech operations in its second-largest market. Furthermore, the company plans to expand its workforce by adding 10,000 employees, resulting in a total of 35,000 in Mexico.
This investment is anticipated to bolster MercadoLibre’s revenue by driving higher transaction volumes, increasing e-commerce penetration, and enhancing its delivery efficiency alongside its financial services ecosystem.
Strategies to Overcome Competition
MercadoLibre holds a robust position in Latin America’s online retail space; however, it faces growing competition from e-commerce giant Amazon (AMZN), which is actively ramping up its operations in the LATAM region. Additionally, Walmart (WMT) remains a significant competitor, particularly in Mexico.
To maintain its competitive edge, MercadoLibre invests strategically in innovation to target lower-ticket sales. The company has upgraded its user interface with better filters and category-specific features in sectors like beauty and fashion. Additionally, it is expanding free shipping on low-cost items and optimizing inventory supply using its CVT system. These enhancements have led to low average selling price (ASP) product sales growing at or above the marketplace average in Brazil and Mexico, solidifying MercadoLibre’s leadership in the area.
Moreover, the company is strengthening its advertising business by enhancing partnerships, improving ad technology, and incorporating display, brand, and video advertising. These initiatives are aimed at boosting monetization, increasing engagement, and elevating product visibility.
In the fintech arena, MELI competes with Rakuten (RKUNY), a Japanese conglomerate with a strong fintech presence across 30 countries, including Brazil, Argentina, and Mexico. Despite this competition, MELI has shown strong performance in its fintech initiatives. In 2024, MELI’s credit portfolio grew by 74% year-over-year, reaching $6.6 billion, with its credit card segment expanding by an impressive 118%. The total assets under management surged 129%, reaching $10.6 billion, largely propelled by the success of the company’s high-yield accounts.
Amid rising interest rates and macroeconomic uncertainties in Brazil and Mexico, MercadoLibre is actively managing credit risk. The company has significantly curtailed microcard issuance, shortened payback periods, and tightened credit expansion in higher-risk segments to sustain stability.
Earnings Estimates Point Upward
The Zacks Consensus Estimate for first-quarter 2025 earnings is currently set at $7.82 per share, reflecting an upward revision of 13.9% over the past 30 days and indicating annual growth of 15.34%.
For the full year 2025, the consensus earnings estimate stands at $47.50 per share, an increase of 8% in the last month, projecting 26.03% growth year-over-year.
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MercadoLibre has exceeded the Zacks Consensus Estimate in three of the last four quarters, resulting in an average surprise of 16.37%. Furthermore, MELI shares are currently trading above both the 50-day and 200-day moving averages, which is considered a bullish technical indicator, suggesting a potential continuation of its upward trend.
MELI Moving Averages Overview
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Despite its forward 12-month Price/Sales ratio of 3.85 outpacing the Zacks Internet-Commerce industry average of 2.09, this premium reflects strong investor confidence in the company’s growth potential for the remainder of 2025.
Why Consider Buying MELI Stock Now
MercadoLibre’s strategic investments in Mexico will further solidify its market position in the region. The company’s proactive strategies against competition and economic risks position it for sustained growth and leadership in Latin America.
As of December 31, 2024, MercadoLibre maintained a sturdy balance sheet, reporting cash and cash equivalents of $2.63 billion and short-term investments totaling $1.05 billion. This strong liquidity supports the company’s growth initiatives and strategic investments.
Plans are underway to double fulfillment centers in Brazil by the end of 2025 and enhance same-day delivery capabilities by 40%. MercadoLibre is also refocusing on lower-risk customers to provide larger credit lines and expand its market reach. Such strategic moves indicate robust long-term growth prospects as the company continues to extend its market foothold.
MELI currently holds a Zacks Rank #2 (Buy) with a Growth Score of A, indicating a favorable investment opportunity based on Zacks’ proprietary evaluation methodology. For further exploration, you can find the full list of today’s Zacks #1 Rank (Strong Buy) stocks here.
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Stay informed with comprehensive analyses on major competitors: Amazon.com, Inc. (AMZN), Walmart Inc. (WMT), MercadoLibre, Inc. (MELI), and Rakuten, Inc. (RKUNY).
This article originally published on Zacks Investment Research (zacks.com).
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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
