MercadoLibre (MELI 2.27%) and Alibaba Group Holding (BABA 1.82%) dominate two of the world's fastest-growing e-commerce markets: The former is the leader in Latin America, and the latter is the top player in China.

MercadoLibre operates in 18 countries, but it generates most of its revenue in Brazil, Argentina, and Mexico. Alibaba's Taobao and Tmall marketplaces are the two largest online marketplaces in China. it also serves overseas consumers with its Southeast Asian marketplace Lazada, its cross-border platform AliExpress, the Turkish marketplace Trendyol, and the Pakistani marketplace Daraz.

MercadoLibre is much smaller than Alibaba. It served 75.9 million unique active users last quarter, compared to Alibaba's 912 million active consumers in China and 265 million overseas consumers. Alibaba generated nearly 28 times as much revenue as MercadoLibre last year, and its market cap is more than five times higher.

A tiny parcel with a Brazilian flag, placed in a tiny shopping cart on a laptop.

Image source: Getty Images.

But MercadoLibre is growing much faster than Alibaba, it doesn't face regulatory challenges in its home market, it faces fewer competitors, and it could have more room to grow over the long term. So could MercadoLibre's market cap eventually match, or even surpass, Alibaba's by 2030?

MercadoLibre's value could more than triple

MercadoLibre's base of active users represents just 12% of the 652 million people who live in Latin America and the Caribbean. By comparison, Alibaba's active consumers represent 63% of China's population of 1.45 billion.

Morgan Stanley estimates that Latin America has an e-commerce penetration rate (the percentage of all retail purchases made online) of just 8%, but that figure could double to 16% by 2025. It expects the Latin American e-commerce market to have a compound annual growth rate (CAGR) of 21% between 2019 and 2015, compared to a CAGR of just 10% between 2012 and 2019.

But between 2012 and 2019, MercadoLibre grew its revenue at a CAGR of 29.6%, nearly triple the region's estimated growth rate. If it merely matches Morgan Stanley's projected CAGR for 2019 to 2025, it could generate more than $7.2 billion in revenue in 2025.

If it maintains that same CAGR for the next five years, it could generate nearly $18 billion in revenue in 2030. And if MercadoLibre is still trading at 16 times sales by then, it could be worth $288 billion -- triple its current value, but still significantly lower than Alibaba's current market cap of $475 billion.

But MercadoLibre's market cap could be much higher by then if it continues to grow faster than the broader market. Its fintech ecosystem, which revolves around Mercado Pago, could also become a secondary growth engine and reduce its dependence on its e-commerce business.

Alibaba's value could more than double to over $1 trillion

China has an e-commerce penetration rate of 27.3%, according to Fidelity International, BTG Pactual Research, and Euromonitor. That percentage is already high (the U.S. has a penetration rate of just 20.3%), so it probably won't increase significantly over the next five years.

Tiny parcels and a credit card placed on a laptop.

Image source: Getty Images.

However, China's total online shoppers could still rise to 1.22 billion by 2025, according to Statista's Digital Market Outlook, representing 83.5% of the projected population. Based on that forecast, the research firm expects China's e-commerce market to grow at a CAGR of 6.7% between 2021 and 2025.

Between fiscal 2016 and 2021 (which ended this March), Alibaba grew its revenue at a CAGR of 47.5%. If it merely matches the industry's estimated CAGR over the next five years, then maintains the same growth rate for another five years, it could generate nearly $150 billion in revenue by fiscal 2026, and over $200 billion in revenue by fiscal 2030. Assuming Alibaba still trades at about four times sales, it could be worth more than $800 billion by 2030.

Yet Alibaba could be worth a lot more, for two reasons. First, its valuations are currently depressed by the regulatory headwinds in China. Second, Alibaba's cloud business -- which only generated 8% of its revenue last year -- could grow much larger, reduce its dependence on its e-commerce businesses, and enable it to grow much faster than most of its e-commerce peers in China. If that happens, Alibaba could more than double in value to more than $1 trillion by 2030.

Look beyond the market caps

I personally own MercadoLibre instead of Alibaba because it's growing faster, has more room to expand, and it isn't being targeted by regulators. In the end, it doesn't matter which e-commerce company has the bigger market cap. Investors should examine their growth rates, tailwinds, and headwinds to decide which is the better long-term investment.