What happened
Shares of MercadoLibre (MELI 2.91%) were down 5.8% as of 12:15 p.m. ET. Latin America's e-commerce and financial technology leader was being dragged down along with other growth stocks following last week's signal from the U.S. Federal Reserve that interest rates might need to be raised faster than originally planned to fight inflation. Paired with the emergence of the omicron coronavirus variant in late November, it's been a tough couple of months for the stock. MercadoLibre is now down some 40% from its last peak in the early autumn of 2021.
So what
For MercadoLibre, which is listed on U.S. stock exchanges, higher interest rates means a lower present stock value. But that's not all the company is contending with. Home base for the e-commerce titan is Latin America, which has been hit especially hard by the pandemic. High rates of inflation and high unemployment are plaguing some countries, including the largest economy in South America: Brazil. In fact, Brazil actually slipped back into a mild recession in December. That clouds MercadoLibre's prospects a bit for 2022.
Image source: Getty Images.
Now what
It's not a pretty picture right now, but bear in mind MercadoLibre grew up in the volatile macro economic environment that is Latin America. In spite of this, e-commerce has continued to advance in the countries it operates in south of the U.S. border, thanks in no small part to MercadoLibre's very successful efforts.
In fact, despite the myriad headwinds it was facing in 2021, the company still managed to grow at a rapid pace. In the third quarter of 2021, revenue was up 73% year over year when excluding exchange rates. Now trading for eight times trailing-12-month sales, MercadoLibre stock could be a fantastic long-term value for this gem. Just expect plenty more volatility ahead given the flood of bad news circulating right now.
