MercadoLibre: High-Growth EM Stock With 100% Upside Potential

Key Points

• MercadoLibre is Latin America's leading eCommerce platform and is deeply undervalued. 
• The Q4 results show strong momentum that will carry through into 2025.
• Analysts' sentiment shifted for the better in early 2025 and provided a tailwind for the stock price action. 

MercadoLibre NASDAQ: MELI is not without hurdles; no company is, but it is well-positioned to sustain high-quality growth for the next decade, and you can buy it for 50 cents to the dollar.

The stock is highly valued relative to its 2024 estimates, but the 46x price multiple does not price in the potential, which is excellent and greatly underestimated.

MercadoLibre is Latin America’s leading eCommerce platform, expanding territories and deepening penetration of markets and services rendered in a region with a rapidly expanding middle class. It was trading at only 7x its 2033 forecasts ahead of the Q4 release, and the 2033 forecast is likely a low estimate. 

Peers such as Amazon NASDAQ: AMZN, Walmart NYSE: WMT, and Shopify NYSE: SHOP all trade at least 15x their 2033 estimates and as much as 21x while growing at less than half the pace. Those details suggest this company could rise by at least 100% and as much as 200%, driven by a powerful force: price multiple expansion, which began with the Q4 2024 earnings release. 

MercadoLibre Unleashes Markets, Shares Hit New Highs

MercadoLibre had a strong Q4 to cap off a solid year, driven by investments in its ecosystem, including technology, fulfillment services, and capacity. The result in Q4 was a stronger-than-expected $12.61 billion in net revenue, up 37.4% annually and 200 basis points above MarketBeat’s reported consensus. 

The strength was driven by a reported 33% increase in total payment volume, a 24% increase in unique buyers, and an 8% gain in gross merchandise volume, up 49% and 56%, respectively, on an FX-neutral basis.

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Currency conversion is MercadoLibre’s most significant hurdle but ultimately underpins the shift to eCommerce by brick-and-mortar retailers as inflationary hurdles drive product mix toward dailies and staples. 

The margin news is even more impressive. The company’s expanding revenue streams, improving leverage, and efficient operation combined to increase the operating margin by 60 basis points and the adjusted net margin by nearly 300.

The net result is adjusted earnings of $12.61, up almost 60% year over year and more than $5.00 better than consensus forecasts. 

The company didn’t give specific guidance but shows clear momentum with solid, double-digit growth across its three primary markets. It plans to continue expanding its capacity in 2025. 

MercadoLibre Builds Value and Leverage for Investors

MercadoLibre doesn’t return significant capital to shareholders, there is no dividend, and buybacks are minimal, but there is an upside for investors. The company self-funds its growth, has a fortress balance sheet, and is building equity.

At the end of 2024, the highlights include increased liability tied to its growing business, specifically the fintech segment, offset by more significant asset increases that left equity up by double-digits. The 41% equity gain is impressive, but more so because of the 68% increase posted at the end of F2024 and the gains expected in 2025. 

The analysts' trends are bullish for this market, revealing a positive shift in sentiment at the start of 2025. The trends include increased coverage relative to the beginning of 2024, a high conviction in the Buy rating, upgrades, and price target revisions reverting from decreases to increases in late January. 

MercadoLibre Hits New Highs: Could Rise by $1,200

MercadoLibre shares rose more than 12% in early premarket action following the Q4 results. The move took the market to a new high, which was significant because of the targets that have come into play.

The stock has rallied steadily since hitting its bottom in 2022, establishing a trading range and price “flag pole” worth $1,400. In this scenario, the stock could rise by another $1,400 now that the range is broken, putting the market near $3,500 and better aligned with peers' valuations.