Why MercadoLibre and Netflix Are Strong Investment Choices This Year

Researchers suggest that investing in the S&P 500 through an exchange-traded fund (ETF) remains a solid option for long-term growth. Historically, this index has delivered reliable returns, with expectations for this trend to continue into the future.

Exploring Alternatives: MercadoLibre and Netflix Shine

However, some stocks are outperforming the broader market. Both MercadoLibre (NASDAQ: MELI) and Netflix (NASDAQ: NFLX) have shown remarkable performance this year. While past success doesn’t guarantee future results, several factors suggest they could continue to excel.

Here’s a closer look at why these two companies stand out.

MELI data by YCharts.

1. MercadoLibre: A Dominant E-Commerce Player

MercadoLibre is the largest e-commerce platform in Latin America, a position so solid that it has kept Amazon at bay. Companies that achieve dominance in a competitive sector typically operate effectively.

Unlike merely imitating Amazon, MercadoLibre has diversified its offerings. The company provides various services like fintech, logistics, and tools for merchants to create online stores. This range of services strengthens its market position.

Furthermore, MercadoLibre benefits from the network effect—its e-commerce value increases as more users join the platform. Additionally, merchants face challenges if they choose to leave, creating a strong incentive to stay, which supports the company’s sustained success.

MercadoLibre’s growth is evident. In the second quarter, its revenue surged by 42% year over year to $5.1 billion, while net income jumped 103% to $531 million. This solid financial performance has positioned the company well for continued growth.

The ongoing rise of e-commerce suggests further opportunities, as more consumers turn to online shopping. MercadoLibre is well-positioned to benefit from this trend, making it an intriguing investment option even after its impressive year.

2. Netflix: Adapting to a Competitive Landscape

As the pioneer of streaming, Netflix has faced increasing competition, with numerous platforms vying for viewer attention. Some services cater broadly, while others target niche markets like sports.

Despite the competition, Netflix remains one of the leading platforms. The company has adapted by launching a lower-cost ad-supported plan and by charging primary account holders for shared accounts, which has helped reverse a previous decline.

Netflix’s financial results reflect this recovery. In the second quarter, revenue rose 17% year over year to $9.6 billion, while net income climbed 44% to $2.1 billion. The total number of paid memberships reached 277.65 million, growing by 16.5% compared to the previous year.

The strength of Netflix lies in its ecosystem. By analyzing viewer data, it tailors its content to viewer preferences, enhancing its offerings. This data-driven approach reinforces a cycle where increased subscriptions lead to better content, which in turn attracts more viewers.

There is still substantial growth potential in the streaming industry. Netflix aims to replace cable, which, despite losing ground, remains prevalent. In August, streaming accounted for 41% of U.S. television viewing time, and this number is likely smaller in many other regions. Hence, Netflix has significant room to expand.

Capitalizing on Timely Investment Opportunities

If you’ve ever thought you missed out on investing in big winners, now is the time to consider these options.

Our team of analysts has identified “Double Down” stock recommendations for companies they believe are on the verge of significant growth. If you’ve hesitated to invest in the past, now might be your moment. The historical returns of past “Double Down” stocks have been impressive:

• Amazon: If you invested $1,000 in 2010, you’d have $21,266!
• Apple: A $1,000 investment in 2008 would have grown to $43,047!
• Netflix: A $1,000 investment in 2004 would now be worth $389,794!

Currently, we are issuing “Double Down” alerts for three promising companies that could offer similar opportunities.

See 3 “Double Down” stocks »

*Stock Advisor returns as of October 7, 2024

John Mackey, former CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. Prosper Junior Bakiny holds positions in Amazon. The Motley Fool has positions in and recommends Amazon, MercadoLibre, and Netflix. The Motley Fool has a disclosure policy.

The views and opinions expressed herein are those of the author and do not necessarily reflect the views of Nasdaq, Inc.