MercadoLibre: A Contrarian Growth Play Amid Market Challenges

Many growth stocks faced recent declines amid trade war fears. However, MercadoLibre, the leading e-commerce firm in Latin America, stands out as a promising investment opportunity with strong revenue growth and rising profitability.

Date: 12-04-2025

AI Rating: 8

Market Context and Concerns
Recent trade tensions, particularly due to the Trump administration's tariff policies, have caused a significant decline in many growth stocks. This shift in market sentiment may lead to a temporary decline in stock prices across the sector, impacting investor confidence. Nonetheless, it may present opportunities for contrarian investors seeking value in undervalued stocks like MercadoLibre.

Earnings Performance and Potential
MercadoLibre's growth trajectory remains impressive. Its revenue, which saw a compound annual growth rate (CAGR) of 55% from 2019 to 2024, is indicative of robust demand in a largely untapped market. Analysts forecast that this growth will moderate but remain strong, with an expected CAGR of 22% for the 2024-2027 period. The ability to leverage high gross margins from its digital payment platform also contributes positively to its earnings visibility.

Profitability Metrics
In 2021, MercadoLibre achieved profitability on a GAAP basis. More recently, its net income has experienced astounding growth, with a CAGR of 184% over the last three years. This performance illustrates heightened efficiency and scaling within its operations. Moving forward, it is projected that net income will continue increasing at a CAGR of 31%, underscoring the company's financial resilience and potential for driving shareholder value.

Valuation Relative to Growth Potential
Despite a stock price of $1,826, MercadoLibre trades at 38 times this year's earnings and 27 times next year's. This valuation remains reasonable compared to slower-growing peers like Amazon, suggesting that MercadoLibre's growth prospects have not yet been fully appreciated by the market. Furthermore, assuming it achieves an EPS growth of 20% over the next three years while trading at 25 times forward earnings, the share price could potentially reach approximately $3,646 by 2030. Such a forecast presents a compelling investment thesis.

Conclusion
Overall, MercadoLibre's growth metrics, profitability trends, and reasonable valuation relative to its growth potential highlight it as an attractive investment opportunity, especially for growth-oriented investors willing to navigate market volatility.

Stocks: MELI AMZN NU