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MercadoLibre vs. Sea Limited: Which Has a Better Business Model?

By Brian Withers and Brian Stoffel - Mar 24, 2021 at 7:44AM

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This one seems too close to call.

Two regional e-commerce players, MercadoLibre (MELI 3.57%) and Sea Limited, both have seen tremendous growth in their online marketplaces, but what about the business models that support these quality operators? On a Fool Live episode recorded on March 12, contributors Brian Stoffel and Brian Withers discuss which of the two business models they like better and why. You might be surprised at how this head-to-head matchup shakes out.

Brian Withers: Which one's better, Brian?

Brian Stoffel: I think they are great. This is like the LeBron-Jordan debate, like we could go on [laughs] forever about this and at the end of the day, if you've got either one of those on your team, you are sitting pretty.

If I had to choose one, I would choose Sea Limited and this is why; because they have this gaming [business]. It's like a cash machine, I own Sea Limited and I'm not interested in it because of the long-term potential of gaming. If it does well, that's great, that's like icing on top. But right now, because it's profitable and bringing in so much money and so popular. It is funding all of this investment in e-commerce in their payment option. I'm sure there'll be other things that it funds, too, whereas MercadoLibre, they just don't have that extra push.

They're still in great shape, but I would give the edge to Sea Limited because of that.

Withers: Yeah, that's a really great perspective, Brian. I agree, this one's a terribly close race. I love Sea Limited's barbell approach with its profitable Garena [digital entertainment] segment. But I'm going to give it some points off, because I don't know that e-commerce is really synergistic with gaming. It's not like you're playing a video game and let me order some groceries for tonight's dinner, [laughs] in between matches.

Certainly there can be in-game purchases, and there's absolutely synergy between the payments platform [and gaming]. But I'm giving the edge to MercadoLibre here. One, because all of their businesses really complement each other, and they are very focused on providing a full service around the Fintech and the e-commerce.

Second, it's got a tremendous head-start on Sea Limited. Surprisingly, MercadoLibre started e-commerce 16 years earlier than Sea Limited and its payments business had started 11 years earlier. So its model, I'll say they have a lot more learnings behind them. Their model is probably a lot more robust and mature. So I'm giving the edge to MercadoLibre.

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Stocks Mentioned

Mercadolibre, Inc. Stock Quote
Mercadolibre, Inc.
$811.44 (3.57%) $28.00
Sea Limited Stock Quote
Sea Limited
$82.86 (4.16%) $3.31

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