E-commerce saw a massive boom during 2020 thanks to the COVID-19 pandemic. As a result, many stocks associated with this industry went up like rocket ships. Unfortunately, most of those same stocks have come crashing back down as investors cycle out of growth stocks.

Even then, the market share e-commerce gained as a portion of total retail sales during the pandemic is likely permanent. In 2019, e-commerce made up 13.8% of total sales; in 2021, that number reached 19.6%, according to Statista. And e-commerce could make up nearly a quarter of all sales by 2025.

Investors should see this sell-off as an opportunity to get in on some stocks they missed before COVID-19. One player I've got my eye on is MercadoLibre (MELI -2.35%), the e-commerce leader in Latin America. 

Person using credit card on his phone.

Image source: Getty Images.

Is the market saturated?

Mercado Libre, an online marketplace, is the company's flagship service. Companies can quickly sell to a large audience through its platform, regardless of whether they're based in Latin America. MercadoLibre also has a digital payments platform, Mercado Pago, that allows consumers to pay with their local currency, but sellers receive U.S. dollars, taking currency exchange out of the equation. To deliver the packages efficiently, MercadoLibre also created a shipping logistics division, Mercado Envios, which managed at least part of the logistics for nearly 90% of packages from its marketplace during the fourth quarter of 2021.

MercadoLibre's platform is without peer in Latin America, and despite its popularity, monthly downloads of its mobile app continue to accelerate.

Chart showing the Mercado Libre app downloads rising as of January 2022.

The spike seen in early 2020 is significant and will likely never be replicated. Yet, Jan. 2022's downloads exceeded most of the later months in 2020 and all of 2021. Notably, this occurred after the holiday month of December. 

With more consumers downloading the marketplace app, MercadoLibre demonstrates it still has room to expand. This uptick in downloads should translate to solid gross merchandise volume (GMV) growth in the first quarter of 2022 and beyond.

Isn't MercadoLibre supposed to be done growing?

The way MercadoLibre's stock is valued, the market is severely underestimating its future growth potential. As a result, from a price-to-sales (P/S) standpoint, MercadoLibre is trading at a five-year low.

MELI PS Ratio Chart

Data by YCharts.

Despite growing revenue 74% year over year in the fourth quarter, the stock has continued its decline. That's good news for investors as they can get into the stock at a significant discount. Even if MercadoLibre's valuation multiple only returns to its five-year average of around 12 times sales, that implies a 69% upside from current levels.

As a whole, e-commerce makes up just 4.9% of sales in Latin America versus 14.2% in the U.S. The industry still has far to go in this region, so investors should take action accordingly.