MercadoLibre (MELI) has a current price-to-earnings (P/E) ratio of 42.7, significantly higher than the Zacks Internet – Commerce industry average of 25.5 and the broader Retail and Wholesale sector’s average of 25.7. This premium valuation raises concerns about long-term sustainability, especially in light of its recent financial performance. In Q2 2025, MELI reported a 34% increase in revenues to $6.8 billion, but operating margins decreased by 210 basis points to 12.2%, indicating pressures from rising competition and heavy spending.
Additionally, MELI is facing intensifying competition from Amazon, which is expanding its logistics in Latin America, and Sea Limited’s Shopee platform, which is gaining traction in Brazil through low pricing strategies. MELI’s heavy reliance on Brazil, Argentina, and Mexico further amplifies its market vulnerabilities, as evidenced by a $117 million foreign exchange loss in Argentina and increased fulfillment costs in Mexico. Furthermore, MELI’s credit portfolio surged by 91% year over year to $9.3 billion, raising concerns over financial stability due to elevated non-performing loans at 18.5%.
The downward revision of earnings estimates by 16.6% for Q3 2025 consolidates the view that MELI’s valuation is overstretched amid weakening fundamentals. Shares have declined by 4.6% in the past three months, underperforming the industry and sector, prompting a Zacks Rank of #4 (Sell) for the stock.
