Could MercadoLibre Have a Massive Growth Opportunity Ahead?

In a recent episode of The Rank, three of our top contributors revealed their highest-conviction stock ideas for 2022. And not only did Fool.com contributor Danny Vena call MercadoLibre (MELI -1.98%) one of his top ideas, but colleagues Matt Frankel and Jason Hall both ranked it number one out of all the stocks discussed on the show. In this clip, recorded on Jan. 10, the trio discusses why they think MercadoLibre could be just getting warmed up. 

Matt Frankel: Danny, why don't you tell us about MercadoLibre, why you saw it so early on in the cycle, and why you love it for 2022?

Danny Vena: To be honest, the reason that I really was sold on MercadoLibre more than a decade ago, is if you look at the trends that the company is riding, the two biggest e-commerce and payments. This was a company that was ahead of the curve. They were the first and probably leading large e-commerce platform in Latin America.

They added a payments segment soon after they went public. Latin America is a place where a lot of folks still do business in cash. You'd be surprised because it's something like half of the transactions in the region are still done in cash. This is a place where more than 50% of the people in Latin America don't have a credit or debit card and so as a result of that, payments was a big deal for them and a reason why e-commerce wasn't being adopted early.

The fact that they had this payment method where folks could go into their local convenience store, similar to 7-Elevens that you would see here, and say, I want to put this money in my account, and they put money into their Mercado Pago account that made it so that customers could actually join the e-commerce revolution. This was a story of a company making all the right moves early on. The reason that I'm still really sold on MercadoLibre is if you look at their most recent quarter, revenue grew 73% year-over-year.

Their payments growth was very high and what's driving the payments growth now is the fact that they've moved beyond just being a payment method for their platform. Their payments have now moved into other websites and other brick-and-mortar stores, and so their payments are growing very quickly. This is such an early-stage story. Latin America has twice the population of the United States. Basically, I see all of these things converging to form something of a once-in-a-generation opportunity. So far, MercadoLibre is one of my best-performing stocks ever. I still see MercadoLibre growing multiples from here going forward.

Frankel: I love MercadoLibre. It was one of my first pandemic buys when the market crashed in March of last year just because I thought I missed the boat and then boom I saw an opportunity to get in at a decent price. I'm starting to see that again right now. I think it's lost about 50% since the highs. MercadoLibre is just like you said a great opportunity in that region. I love what they're doing on the fintech side of the business because financials are my specialty. It often gets called the Amazon (AMZN -1.14%) of Latin America.

Jason Hall: It's so much more than that.

Frankel: It's so much more, I would call it the Amazon, the PayPal (PYPL -1.83%), the eBay (EBAY 1.01%) all in earlier stages of the business cycle.

Vena: The Shopify (SHOP 0.14%).

Frankel: The Shopify and you can go on.

Vena: The Square [Block] (SQ -1.97%).

Frankel: There's a whole list so.

Hall: What's the big Chinese e-commerce company?

Frankel: Alibaba (BABA 0.09%).

Hall: I think that maybe that's more appropriate to be honest with you. It's just such an incredible business. Yet you are talking about where it is in the cycle. This is a 23-year-old business but Latin America is still single low, mid-single digits in terms of e-commerce penetration. It is just getting started. I heard Marcos Galperin, the Founder and CEO in an interview with actually I think was PayPal CEO during the lockdown was doing these. I think he's still doing them but he said it's his mission to make Latin America a cashless society. That tells you right there in one sentence where their focus is.

Last thing I want to say, data. We talked about Upstart (UPST -0.58%) and so many of these other companies and data and where it is. I think people under-appreciate how much data MercadoLibre has about its merchants, about its customers that can help it grow its lending business on both sides of that coin can help us with logistics, can help it add all of those fintech things that it does, all the payments since there does, I don't think we give them enough credit for the amount of data that they have.