Amazon (NASDAQ:AMZN) has been one of the undisputed beneficiaries of the lockdowns that have blanketed much of the country -- and even the world -- since the COVID-19 pandemic began. Consumers turned to e-commerce in accelerating numbers to avoid leaving home for fear of contracting the virus.

It wasn't just online sales that attracted the growing number of customers, as cloud computing got a boost from the trend toward remote work. Members of Amazon Prime, the company's customer loyalty program, also enjoyed the benefits of streaming television from Prime Video and streaming songs from Prime Music.

The proof was undeniable when Amazon reported its second-quarter results: Net sales soared 40% year over year and the company generated more than $5.2 billion in net income -- even after spending an incremental $4 billion to combat coronavirus.

As impressive as all that is, MercadoLibre (NASDAQ:MELI) will be an even better growth stock in the months and years to come.

Smiling woman entering credit card into ecommerce site on laptop

Image source: Getty Images.

A little context

While e-commerce and digital payments are commonplace in the U.S., it's not so in Latin America, which is nearly a decade behind in terms of adoption. During the first quarter of 2020, online sales accounted for about 12% of total retail in the U.S., up from about 4% 10 years ago. In Latin America, however, the number is far lower, representing just 4.2% of total retail in the region. This shows that MercadoLibre is still much earlier along the growth curve in its home market than Amazon.

There's more. In the U.S., Amazon is unsurpassed when it comes to e-commerce, as the company dominates the online sales landscape. Estimates vary, but Amazon may have accounted for nearly half of all e-commerce transactions in the U.S. in 2019. That's a double-edged sword, however, giving the company fewer customers to convert.

It's also worth noting that, while the population of the U.S. stands at about 331 million, Latin America represents a much larger market, with a population of nearly 646 million -- or about twice that of the U.S., giving MercadoLibre a much larger base of potential future customers. 

Christ The Redeemer statue, Rio de Janeiro, Brazil.

Image source: Getty Images.

How do you want to pay for that?

It isn't just the nascent e-commerce market in Latin America that provides MercadoLibre with such an opportunity. It operates in an area of the world that is unique in terms of how consumers pay for purchases.

MercadoLibre launched about 20 years ago in its native Argentina and quickly expanded to many of the other countries in Latin America. Research shows that roughly 70% of the population in the region doesn't have a bank account and only between 20% and 55% use a credit card, though usage varies by country. Because of this early stumbling block, the company created Mercado Pago, a payment system modeled after PayPal. This allowed consumers to use a network of convenience stores and other locations to pay cash for their purchases, an advantage other competitors simply don't have.

Mercado Pago became so popular that other online merchants were soon clamoring to deploy it on their websites as a payment option, giving MercadoLibre a cut of each transaction. That soon spread to brick-and-mortar stores that wanted to cater to the payment preferences of their shoppers. This made Mercado Pago one of the fastest growing fintech companies in Latin America.

A woman holding a smartphone with financial symbols swirling above.

Image source: Getty Images.

Pulling it all together

MercadoLibre has been able to parlay its unique knowledge and hometown advantage into an industry-leading position in Latin America. The company is the undisputed e-commerce market leader in each of the major countries in which it operates in terms of unique visitors and number of page views. Mercado Pago has been growing like gangbusters -- and that was even before the coronavirus pandemic struck, driving a sea change in consumer purchase and payments behavior.

In the second quarter, MercadoLibre's net revenue soared 123% in local currencies, accelerating from 71% growth in the first quarter, due to the accelerating adoption of e-commerce and digital payments. This was driven by gross merchandise volume that soared 102%, up from 34%. To give those numbers context, Amazon's net sales grew 40%, up from 26% growth in the first quarter.

The ascent of Mercado Pago's payments was even more impressive, with total payment volume up 142%, accelerating from 82% in Q1.

MELI Chart

Data by YCharts.

A final word

Don't get me wrong: I'm not disparaging Amazon in any way. In fact, I'm a shareholder and Amazon is one of my largest positions. I even recommended it recently as one of my favorite stay-at-home tech stocks to buy right now. Its lead in cloud computing has thus far been insurmountable for the competition, and Amazon is slowly making headway in international markets.

As the chart above shows, MercadoLibre's stock has outperformed Amazon's over the past several years. I believe that the combination of factors outlined above favors MercadoLibre over Amazon as a growth stock.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis -- even one of our own -- helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.