We came across a bullish thesis on MercadoLibre, Inc. (MELI) on Substack by The Wolf of Harcourt Street. In this article, we will summarize the bulls’ thesis on MELI. MercadoLibre, Inc. (MELI)’s share was trading at $2223.35 as of Feb 24th. MELI’s trailing and forward P/E were 58.99 and 50.76 respectively according to Yahoo Finance.
An e-commerce platform displaying a wide range of products to customers online.
MercadoLibre (MELI) delivered an outstanding financial performance, with revenue surging 37% year-over-year (YoY) to $6.06 billion, surpassing Wall Street expectations of $5.94 billion. Operating income soared 145% YoY to $820 million, while net income surged 287% YoY to $639 million. Earnings per share (EPS) of $7.56 significantly beat estimates by 67%, reflecting strong execution across the company’s marketplace, fintech, and logistics segments. Despite concerns over slowing GMV growth, MELI’s FX-neutral perspective presents a more robust picture, with Brazil and Mexico experiencing 32% and 28% YoY growth, respectively. The company’s first-party (1P) strategy drove strong Black Friday and El Buen Fin sales, but third-party (3P) sellers remain the dominant force, contributing nearly 95% of GMV.
Unique buyers grew 24% YoY to 67 million, marking the fastest growth rate since Q1 2021 and underscoring MELI’s expanding market penetration. The company crossed 100 million active buyers for the first time, with management confident in further growth given Latin America’s 600 million population. High-frequency categories such as staples, clothing, and beauty continue to drive marketplace expansion, supporting MELI’s long-term transition from offline to online retail. Mercado Envíos played a crucial role in sustaining growth, handling 1.8 billion fulfilled items in 2024, with a record 500+ million in Q4 alone. Same-day and next-day deliveries grew 21% YoY, contributing to record-high on-time delivery rates and improved fulfillment efficiency. New Metro Fulfillment Centers in Brazil further accelerated logistics capabilities, while evolving consumer preferences led to higher adoption of Meli Delivery Day, which offers free shipping in exchange for slower delivery times.
Mercado Pago, MELI’s fintech arm, continued its rapid expansion, with monthly active users growing 34% YoY to 61 million. Heavy users are increasing even faster, driven by market-leading deposit yields and access to credit lines. The Mercado Pago credit card has become central to MELI’s ecosystem, benefiting from proprietary underwriting models that minimize defaults. The card is now the most-used credit card on MELI’s Brazilian marketplace, highlighting its competitive edge. Assets under management (AUM) surged 129% YoY to $10.6 billion as more consumers deposited funds into Mercado Pago’s high-yielding accounts. Total payment volume (TPV) reached $41.9 billion, growing 20% YoY despite FX headwinds, with MELI making significant strides in merchant acquiring, fraud prevention, and approval rate optimization.
Mercado Crédito posted 74% YoY growth, reaching $6.6 billion in loans, with strong contributions from both consumer and merchant credit. The credit card portfolio surpassed consumer loans for the first time in Q4, reflecting MELI’s strategic shift toward financial products with higher engagement and profitability. Despite expanding its loan book, MELI maintained stable asset quality, with non-performing loans (NPLs) at 7.4%. Merchant credit penetration increased to 24.6%, reinforcing MELI’s ability to cross-sell financial products to its vast ecosystem of sellers. The company’s insurtech division also gained traction, surpassing 10 million active users.
MELI’s revenue mix continues evolving, with commerce revenue growing 44% YoY (106% FX-neutral) to $3.6 billion. A rising take rate of 20.8%, driven by increased shipping billings and ad penetration, further boosted results. Advertising revenue accelerated 41% YoY (88% FX-neutral), reaching 2.1% of GMV, signaling strong monetization potential. Fintech revenue rose 29% YoY (84% FX-neutral) to $2.5 billion, though the take rate contracted slightly due to lower financial income and a shift toward higher-quality credit customers. Despite these headwinds, MELI’s overall profitability remains strong, and its ability to drive high-margin fintech revenue is a key long-term advantage.
The stock remains well-positioned for further upside as MELI continues executing across its marketplace, fintech, and logistics divisions. With a growing base of high-frequency buyers, improving fulfillment efficiencies, and deeper integration of financial services, MELI is building a defensible moat in Latin American e-commerce. Investors looking for exposure to a rapidly expanding digital ecosystem with strong operational momentum and multiple growth levers should find MELI’s current valuation compelling. The company’s ability to sustain double-digit GMV growth, enhance take rates, and expand its fintech ecosystem positions it for significant long-term value creation.
MercadoLibre, Inc. (MELI) is not on our list of the 30 Most Popular Stocks Among Hedge Funds. As per our database, 96 hedge fund portfolios held MELI at the end of the third quarter which was 87 in the previous quarter. While we acknowledge the risk and potential of MELI as an investment, our conviction lies in the belief that some AI stocks hold greater promise for delivering higher returns, and doing so within a shorter timeframe. If you are looking for an AI stock that is more promising than MELI but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
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Disclosure: None. This article was originally published at Insider Monkey.