Investing in e-commerce stocks in 2022 hasn't been easy, no matter the company. E-commerce stocks from around the world are down year to date:

  • Shopify is down 78%.
  • Sea Limited is down 74%.
  • Alibaba Group Holding is down 29%.

Even the stalwart Amazon is down 29% in 2022.

Latin American e-commerce leader MercadoLibre (MELI 0.91%) is no different as it has fallen 32%. However, the company has put up strong results, and its prospects are growing even more appealing. Most investors don't recognize this, which is why shares have slumped. However, smart investors know that MercadoLibre looks very attractive right now.

Person unpacking a box.

Image source: Getty Images.

1. Latin American e-commerce isn't like in the U.S.

Part of the reason many e-commerce stocks have slumped recently is that the U.S. and parts of Europe have seen economic conditions worsen. With high inflation and fears of a recession, consumers are much less eager to buy discretionary goods on e-commerce sites. 

While challenges in the U.S. and Europe take a toll on the global economy, e-commerce adoption in Latin America hasn't skipped a beat. In 2022, retail e-commerce sales growth in three of MercadoLibre's biggest markets -- Brazil, Argentina, and Mexico -- jumped between 18% and 22% on a year-over-year basis. 

This helped MercadoLibre see expansion rates this year that U.S. e-commerce companies could only dream of, and its second-quarter revenue soared 52% to $2.6 billion. This was driven by continued adoption as the company reported over $8.6 billion in gross merchandise volume (GMV) -- up 22% year over year. Compare that to Shopify, for example, which saw second-quarter revenue and GMV increase just 16% and 11%, respectively.

What's even more impressive? MercadoLibre is still early in its growth story. E-commerce penetration in Latin America sat at just 9% in 2021, but that could fly to 16% by 2025. As the market leader with 13% of all Latin American citizens on its platform, MercadoLibre looks ready for takeoff.

2. Don't sleep on Mercado Ads

Not only does MercadoLibre have a greenfield opportunity in its core competency, but it's also expanding into other business segments. Most investors know about MercadoLibre's fintech (Mercado Pago) and logistics (Mercado Envios) arms, but have you heard about Mercado Ads?

Mercado Ads has been held relatively close to the vest, but it is MercadoLibre's ad business on its e-commerce site, and the company just started experimenting with ads on its fintech platform. Mercado Ads is still young, but it's showing promise. In the first quarter, the advertising business saw revenue double on a year-over-year basis, and management said in the latest earnings call that Mercado Ads is just "beginning to scratch the surface of its potential."

While investors might not be able to quantify how big Mercado Ads could grow over the next decade, it's safe to say there is a considerable opportunity ahead. Digital ad spending in 2021 was roughly $10.3 billion in Latin America, and it's predicted to reach $14.5 billion by 2024. With the scale MercadoLibre already has with its more than 80 million active users, there are a lot of eyes looking at potential ad space.

3. MercadoLibre stock is cheap right now

Despite how much MercadoLibre has thrived this past year, shares are sporting their lowest valuation in years at just five times sales as of this writing. 

MELI PS Ratio Chart

Data by YCharts.

Not only is this the company's lowest valuation in over a decade (excluding earlier this year), but its price-to-sales multiple has only been this low one other time since the company went public in 2007. Additionally, this multiple is lower than that of e-commerce peers like Shopify and Etsy.

With these enormous opportunities ahead, one might think MercadoLibre would be defying the market downturn, but instead, investors are getting a deal. The company is leading the growth of e-commerce in Latin America, and at these levels, investors can enjoy a relative bargain. I'm not waiting to load up on shares, and you might regret not buying at these prices too.