--- type: "source" source_kind: "article" title: "Mercado Libre Is Growing 30%-Plus a Year: Its Stock Is Too Cheap" "source url": "https://www.theinformation.com/articles/mercado-libre-growing-30-plus-year-stock-cheap?utm_campaign=article_email&utm_content=article-16947&utm_medium=email&utm_source=sg&rc=dm8gip" author: - "[[Anita Ramaswamy]]" published: 2026-04-21 captured: "2026-04-21T09:48:40-04:00" status: "inbox" description: "Latin America’s largest tech firm, e-commerce and fintech juggernaut Mercado Libre, is on sale. The company’s share price has dropped 9% over the past 12 months even as its business has continued to rocket along at a 30%-plus revenue growth rate. Investors are skittish about growing competition ..." tags: - "reference" topics_auto: entities_auto: related_auto: distilled_to: used_in: --- ## AI Distillation --- clipped_from: https://www.theinformation.com/articles/mercado-libre-growing-30-plus-year-stock-cheap?utm_campaign=article_email&utm_content=article-16947&utm_medium=email&utm_source=sg&rc=dm8gip clipped_date: 2026-04-21T09:48:40-04:00 title: Mercado Libre Is Growing 30%-Plus a Year: Its Stock Is Too Cheap tags: article, summary, AI --- **Thesis:** Mercado Libre's stock is undervalued despite 30%+ annual revenue growth, as investors overreact to competition from Sea Ltd. The company's high-margin advertising and fintech units are growing rapidly and should boost future profitability. With a forward sales multiple of 2.6x and projected 34% growth, it presents a buying opportunity for long-term investors. **Key Mechanisms / Ideas:** - Revenue growth and stock valuation - Competition and market expansion in Latin America - High-margin businesses: advertising and fintech (e.g., MercadoPago) - Valuation multiples (forward sales, comparisons with Amazon and Sea) - Free cash flow margin and operating margin dynamics - Credit card provisioning and accounting rules - Investment strategies balancing growth and profitability **Why This Is Important:** Strategically, this analysis matters for investors assessing growth stocks in emerging markets, highlighting the value of high-margin segments and competitive resilience. Intellectually, it examines how market sentiment can lead to mispricing despite strong fundamentals, and the interplay between growth investments and profitability in tech firms. **Open Questions:** - How sustainable is Mercado Libre's revenue growth given rising competition from Sea Ltd.? - What are the long-term risks and profitability of the credit card business with its loan loss provisions? - Can the advertising unit achieve higher penetration rates comparable to Amazon? - Is the decline in operating margin a temporary result of growth investments or a structural issue? - How reliant is the company on the Brazilian market, and what are the diversification plans? ## Full Content [True Value](https://www.theinformation.com/features/true-value) Latin America’s largest tech firm, e-commerce and fintech juggernaut Mercado Libre, is on sale. The company’s share price has dropped 9% over the past 12 months even as its business has continued to rocket along at a 30%-plus revenue growth rate. Investors are skittish about growing competition posed by Singapore’s Sea Ltd. in Mercado Libre’s largest market, Brazil. But investors may be overreacting: There is plenty of room for multiple players to succeed in expanding the Latin American e-commerce market. And Mercado Libre’s history of robust growth suggests its management team is skillfully walking the line between growth and profitability. ### The Takeaway - Mercado Libre stock dropped 9% despite 30%+ annual revenue growth. - High-margin advertising and fintech units boost future profitability. - Company trades at 2.6x forward sales, with 34% projected revenue growth. Powered by [Deep Research](https://www.theinformation.com/deep-research) Besides, two of the company’s newer business lines—providing credit cards to consumers and selling advertisements on its platform—should contribute to higher margins over time. “Anything even remotely related to digital AI software \[or\] e-commerce site businesses have all been in the crosshairs of the market angst, and then there are also a little bit more specific concerns around the level of investment which has been required” from Mercado Libre to maintain its dominant position in the region, said Ben Drury, a portfolio manager on Baillie Gifford’s Global Alpha team. Over the past 12 months, the S&P Latin America 40 index has gained 63%, spotlighting Mercado Libre’s underperformance. Shares of Nu Holdings, a Latin American digital bank, are up 41% in the same period. Drury says he is holding shares in the company for the long term and thinks they can double in value from their current level. He last bought shares for his fund in December at more than $2,100 per share, significantly higher than Monday’s closing price of $1,870. Drury isn’t the only bull on the stock. Recent securities filings indicate that asset managers Pictet and Wellington Management are among the institutional investors loading up on it lately. **Ads and Fintech** Like Amazon’s site, Mercado Libre’s shopping website mostly serves as a marketplace for outside merchants, although the company sells some items directly. Also like Amazon, Mercado Libre handles shipping for merchants and places ads for sellers on the platform and elsewhere. It also offers credit cards, insurance and other fintech services. Mercado Libre isn’t getting enough credit for its advertising and fintech operations, both of which are higher margin than its core e-commerce business. Executives have said the advertising business is “still small compared to its potential” as a percentage of the total value of sales made on its platform, though they haven’t recently quantified the amount of revenue it generates. But the ad business grew quickly in the fourth quarter, expanding 67% year over year, which CEO Ariel Szarfsztejn attributed to technological improvements such as optimizing ad placement and making Mercado Libre’s platform for advertisers more user-friendly. “What should excite investors is that advertising is still growing rapidly and is well below the penetration of Amazon,” wrote one bullish investor, Brett Schafer, in a [newsletter](https://www.emergingmoats.com/p/mercadolibre-cheapest-in-years-ticker) earlier this month. Baillie Gifford’s Drury, for his part, said most of the value appreciation he expects in Mercado Libre’s stock price over the next five years should come from its financial services arm, MercadoPago, which provides payment, banking and credit card services to consumers, as well as card processing services for businesses. Mercado Libre’s fintech unit overall grew 46% last year to $12.6 billion, comprising nearly 44% of the company’s top line. Sea’s fintech arm, which is younger than Mercado Libre’s, expanded even faster last year, but it still made up just under 17% of the company’s total sales in the period, with most of the rest coming from e-commerce. That suggests that at least for now, Mercado Libre deserves a higher valuation multiple. What’s more, the full benefit of Mercado Libre’s fintech unit isn’t yet apparent because it launched a credit card product in Mexico in 2024 and Argentina in 2025, and the accounting rules for such products encourage a conservative approach to forecasting future losses. Mercado Libre’s credit portfolio doubled in size in 2025 to $12.5 billion. Just over half of the company’s revenue last year came from Brazil, where it launched credit cards in 2021, with another 22% coming from Mexico and 21% from Argentina. “In terms of the valuation and trajectory of the company, launching the credit card has been in the short term a drag on margins, because you need to do the provisions \[for loan losses\] up-front, accountingwise,” said Leandro Cuccioli, who leads corporate development and strategy at Mercado Libre. “Then you enjoy over time the fruits of that relationship with the consumer. Once they start using a credit card, there is a little stickiness.” Still, growth in fintech helped lift Mercado Libre’s free cash flow margin to 37% last year from 32% in 2023. That margin is much higher than that of rivals like Sea. **Growth Investments** At the current price, Mercado Libre is trading at 2.6 times forward sales, below Amazon’s equivalent multiple of 3.4 times, according to Koyfin, but above Sea’s 1.6 times. Analysts expect Mercado Libre to post 34% growth in revenue this year, according to S&P Global Market Intelligence. That would be a bit slower than the near-40% rate of the past couple of years. But it’s quite a bit faster than Sea, which is expected to post 27% top-line growth this year, according to S&P. (Amazon, meanwhile, whose revenue is 25 times greater, is expected to increase revenues at a much more sedate 12.7% rate.) Mercado Libre’s operating margin has suffered as the company has responded to competition from Sea, whose Shopee unit sells lower-end wares, typically with slower shipping times. Mercado Libre recently dropped the amount Brazilian customers must spend in a single order to qualify for free shipping on that basket. That contributed to the fall of its operating margin to 11% at the end of last year from 14.5% in 2023, its highest level in several years. Still, “this isn’t a case where the business is just maturing and becoming less profitable. This is them choosing to invest behind that growth and expand the market,” said Drury. Cuccioli said, “Nobody can grow 30% or 40% forever, and even if it’s been going six years and here we are, the reality is that you cannot have infinity market share. At a certain point, it’s going to reverse. We will not grow at 40%, but we are going to post better margins.” Anita Ramaswamy is a financial analysis columnist at The Information. She can be reached at anita@theinformation.com or over phone and Signal at +1 480-463-4056. Follow her on X at @anitaramaswamy.