**MercadoLibre (NASDAQ: MELI)** has experienced a significant decline of 36% in its stock value over the past year, attributed to falling profits despite reporting a robust 49% revenue growth in the first quarter. The company’s operating income dropped from $763 million to $611 million, with increased competition from firms like Sea Limited’s Shopee and Amazon in its primary market, Brazil, which accounts for nearly half of its revenue.
To combat competition, MercadoLibre has reduced its free shipping threshold in Brazil, a strategy that previously helped boost gross merchandise volume (GMV) growth by 38%. Additionally, the company’s credit portfolio expanded by 87% to $14.6 billion, despite showing rising delinquency rates. Management asserts that current margin compression is a temporary challenge as they prioritize long-term growth and continue investing in markets such as cross-border trade.
Overall, MercadoLibre’s long-term growth prospects remain optimistic, with significant room for expansion in Latin America’s e-commerce landscape, where online purchasing frequency is currently much lower than in the U.S.
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