We recently compiled a list of the 15 Best Growth Stocks to Buy for the Next 5 Years. In this article, we are going to take a look at where MercadoLibre Inc. (NASDAQ:MELI) stands against the other growth stocks.
Kevin Mahn, President & CIO at Hennion & Walsh Asset Management, recently appeared on CNBC on January 6 to discuss the current market momentum and emphasize the need for investors to be selective in 2025 to find growth opportunities. He highlighted that while the MAG7 have led the market recently, their leadership may not continue. Mahn referenced historical data, noting that since 1950, there have been nine instances where the market rallied by 20% or more, with the market rising in eight of those cases. However, he pointed out that gains in the following year averaged only 3.6%, indicating a need for careful selection. He also acknowledged recent market trends, including a decline in the S&P 500’s performance and a potential shift in investor sentiment following events like the Santa Claus Rally.
He predicted a path of lower interest rates, expecting 50 basis points of cuts this year instead of the previously anticipated 100 basis points. Mahn suggested that this environment would create favorable conditions for stocks and bonds but urged investors to diversify beyond mega-cap tech stocks into sectors like biotech and aerospace. Earlier on January 3 as well, Mahn noted that after two consecutive years of gains, a third year of strong performance appears unlikely. He remarked that it seems the Grinch got in the way of the Santa Claus rally this year.
He also addressed concerns from investors tempted to time the market or sell their holdings. He warned against trying to time the market, describing it as often futile. Instead, he advocated for rebalancing portfolios to align with long-term goals and risk tolerance. He suggested that the economic landscape is changing, with lower interest rates and stagnant economic growth expected moving forward. Mahn advised investors to take profits from sectors that previously led the market and consider reallocating those funds into different areas poised for future growth. He highlighted biotech as a promising sector, noting bipartisan agreement on the need to lower drug prices. This shift could lead large-cap pharmaceutical companies to seek new revenue sources, making smaller biotech firms attractive.
Methodology
We first sifted through online rankings, and internet lists to compile a list of the top growth stocks to buy for the next 5 years. We then selected the stocks with high 5-year revenue growth and high analysts’ upside potential. From those we picked 15 stocks that were the most popular among elite hedge funds and that analysts were bullish on. The stocks are ranked in ascending order of the number of hedge funds that have stakes in them, as of Q3 2024.
Why are we interested in the stocks that hedge funds pile into? The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 275% since May 2014, beating its benchmark by 150 percentage points (see more details here).
A customer using their phone to access an online commerce platform.
MercadoLibre Inc. (NASDAQ:MELI)
Number of Hedge Fund Holders: 87
5-Year Revenue CAGR: 55.26%
Upside Potential as of January 15: 27.60%
MercadoLibre Inc. (NASDAQ:MELI) is an e-commerce platform that operates in 18 countries with a strong presence in Brazil, Mexico, and Argentina. It has established itself as a dominant force through its extensive logistics network and the development of Mercado Pago, which is a digital payments platform that has evolved into a Fintech segment.
The company delivered exceptional growth in Q3 2024. In Brazil, GMV (gross merchandise value) surged 34% year-over-year, while Mexico saw a 27% increase. In Argentina, the platform surpassed a milestone, processing over a record 60 million items sold. This was fueled by a record 7 million new buyers. This highlights the untapped potential in the Latin American e-commerce market, where online penetration remains relatively low at only 15%.
Strategic investments across commerce and fintech platforms have significantly improved delivery speeds and reliability. The expansion of the logistics network, with the addition of six new fulfillment centers (five in Brazil and one in Mexico), further enhanced this improvement. These translated into revenue growth of 35% year-over-year.
The 3 most recent analyst ratings were released by JP Morgan, Wedbush, and Citigroup on January 8 and January 6 in 2025, and November 26 in 2024, respectively. With an average price target of $2166.67 between JP Morgan, Wedbush, and Citigroup, there’s an implied 17.51% upside for the company. MercadoLibre Inc.’s (NASDAQ:MELI) e-commerce and fintech businesses are driving strong growth for it, with a leading brand and attractive valuation despite potential future competition. Infuse Asset Management stated the following regarding the company in its Q4 2024 investor letter:
“Staying in Latin America, MercadoLibre, Inc. (NASDAQ:MELI) continues to spin its commerce/payments flywheel. While it started out as an e-commerce platform, its fintech business is now much larger. When management pulled back on giving out loans for fear of a worsening economy, overall revenue growth picked up with accelerating GMV in the core e-commerce business. Then, the finance business segment started to reaccelerate when the team realized nonperforming loan ratios were lowered than expected. But the segments aren’t fully independent. There is a beautiful synergy as on-platform payments lower the friction for the commerce business and faster delivery times lead to more orders and therefore more payments. Meanwhile, MELI also offers a plethora of tools for merchants in both commerce and finance. The company is still growing more than 30% and it has a leading brand in Latin America. Someday Nu and MercadoLibre will bump up against each other but I think we still have at least 5 years before they start competing head-on. For less than 30x forward earnings, the valuation is still reasonable for the company.”
Overall MELI ranks 7th on our list of the best growth stocks to buy for the next 5 years. As we acknowledge the growth potential of MELI as an investment, our conviction lies in the belief that AI stocks hold great promise for delivering high 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.
READ NEXT: 20 Best AI Stocks To Buy Now and Complete List of 59 AI Companies Under $2 Billion in Market Cap.
Disclosure: None. This article is originally published at Insider Monkey.