When it comes to e-commerce, no other platform dominates like this company. In the U.S., we'd be talking about Amazon.com, but in Latin America, the e-commerce powerhouse is MercadoLibre (MELI 2.27%).

I met members of the MercadoLibre leadership team on a business trip to Argentina before the company went public. They were a group of wonderfully unassuming, down-to-earth people. They were so laid back that I didn't think it possible for them to take their business seriously. So when MercadoLibre's IPO went live, I didn't invest. This is a cautionary tale to not judge a book by its cover because, back then, MercadoLibre was a millionaire maker stock.

Fast forward to today. The company enjoyed a stellar 2019 with net revenue of $2.3 billion, compared with $1.4 billion in 2018. So is it too late now, or does further upside remain for MercadoLibre? Let's dive into the company to find out.

A miniature shopping cart with packages adorned with the Brazilian flag on top of a computer.

Image source: Getty Images.

A diverse company

MercadoLibre's strength is that it's not just an e-commerce company. The organization built a commerce and fintech ecosystem around facilitating transactions between businesses and individuals.

E-commerce is just one component. MercadoLibre also offers a payment platform called Mercado Pago, a logistics operation called Mercado Envios, a credit business named Mercado Credito, and many other services.

Results from its lines of business have been strong. The total volume of payments made through Mercado Pago rose 63.5% year over year, reaching $8.7 billion in the 2019 fourth quarter. Mercado Envios shipped 92.6 million items in Q4, a 47.1% year-over-year increase.

Because many consumer transactions occur in cash throughout Latin America, MercadoLibre addressed this by offering Mercado Pago as an offline and mobile point-of-sale system for small businesses and individuals. The total payment volume for this piece of its business grew 121.3% year over year in the fourth quarter, reaching $4.7 billion in transactions, accounting for more than half of Mercado Pago's payment volume.

Its Mercado Credito business uses artificial intelligence algorithms to feed into proprietary credit risk models. Principal and interest payments are collected from transactions made on the MercadoLibre platform, reducing the risk of the loans provided by MercadoLibre being uncollectible. This system allowed the company to grow its credits business by 92% year over year, according to CFO Pedro Arnt.

MercadoLibre continues to roll out new products and services. For instance, the company extended its Mercado Credito offering from a focus on businesses to consumer lending, and it now provides prepaid cards as well. The company is on a mission to expand access to financial services in Latin America, and that's what makes MercadoLibre a compelling company to invest in.

Latin America's regional impact

MercadoLibre's limiting factor is the broader economics and internet usage of Latin America. If the region's economies grow, it helps MercadoLibre achieve growth as well.

On that front, the International Monetary Fund estimated GDP growth for Latin America over the next two years, but that was before the coronavirus pandemic. How long it will take the region to recover from the coronavirus is unknown at this point.

A key factor in MercadoLibre's prospects is the increase in e-commerce sales in Latin America. Regional e-commerce sales are projected to grow from $61.6 billion in 2019 to $82.3 billion in 2022.

Looking at 2019, when Latin American economies were sluggish, MercadoLibre still managed strong growth thanks to an increase in the region's digital economy, which has risen nearly 20% over the last three years. This translated into MercadoLibre's registered users growing from 267.4 million in 2018 to 320.6 million last year.

This bodes well for the long run. Once the pandemic is behind us, MercadoLibre is in an excellent position to continue its growth, given that Latin America is one of the fastest growing e-commerce regions in the world.

The final verdict

MercadoLibre's business model and offerings are tailor-made for Latin America. This puts the company in a strong regional leadership position. But does this mean MercadoLibre stock is a millionaire maker?

MercadoLibre possesses many qualities that make it a worthwhile investment, and perhaps the biggest is the growth opportunity in the Latin American region itself. That said, even with economic growth returning after the pandemic and room to continue expanding its user base, MercadoLibre still has work to do.

The company experienced a net loss of $172 million in 2019, compared with a net loss of $36.6 million in 2018. It's common for technology stocks to be valued based on potential rather than profit, but MercadoLibre will need to improve its financial health, and once addressed, the company's stock can become a millionaire maker.