MercadoLibre Earnings: Investments Aiding Strong Demand Growth and a Leading Network Edge

Key Morningstar Metrics for MercadoLibre

• Fair Value Estimate: $2,030
• Morningstar Rating: ★★
• Morningstar Economic Moat Rating: Wide
• Morningstar Uncertainty Rating: High

What We Thought of MercadoLibre Inc’s Earnings

MercadoLibre’s second-quarter net revenue and financial income rose 34% (53% in constant currency), led by a 77% increase in Argentina (130%). Income from operations grew 14%.

Why it matters: In our view, MercadoLibre’s powerful platform continues to strengthen, aided by prudent investments in logistics and fulfillment, as well as higher adoption of its financial product offering, all of which are enhancing the network’s value proposition.

• Total commerce revenue grew by 29%, driven by 25% active user growth (the strongest since early 2021). In Brazil, the firm dropped its item price point for free shipping and cut delivery costs for suppliers, leading to units sold ramping to 34% growth in June versus the 26% in the full quarter.
• Financial technology sales increased 40%, with a 30% increase in monthly active users, aided by services like deposit yields and credit on purchases. To this point, the company’s credit portfolio grew by 91% while maintaining delinquencies at comfortable levels.

The bottom line: Shares were lower by 6% during Aug. 4 after-hours action, due to higher marketing and logistics investment in the quarter. But we plan to lift our $2,030 per share fair value estimate for wide-moat MercardoLibre as this near-term spending is adding to already stout sales growth.

• We plan to increase our 2025 revenue growth estimate to the low-30s from 29%, driven by improved demand on the company’s core commerce and fintech platforms.
• We see shares as appropriately valued, after factoring in the move lower in shares with our planned increase in our fair value estimate.

Big picture: We remain constructive on MercadoLibre’s opportunity in Latin America, given 85% of the region’s retail spending still occurs at physical stores. We think the company’s less than 5% share of the retail market can expand for the foreseeable future.