MercadoLibre (MELI 3.16%), Latin America's largest e-commerce company, went public at $18 a share in 2007. Today, its stock trades at about $2,330. That 12,844% gain would have turned a $10,000 investment into $1.29 million.
From 2007 to 2024, MercadoLibre's annual revenue grew at a stunning CAGR of 38%. It established a first mover's advantage in Latin America's fertile e-commerce market, expanded its logistics network across the region's challenging terrain, and locked its shoppers into its Mercado Pago digital payments platform and other fintech services.
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MercadoLibre also turned profitable again in 2021, and its annual net income increased at a whopping CAGR of 184% over the following three years. Its profits surged as it sold more higher-margin products on its first-party marketplace, generated higher-margin revenue from its third-party marketplace, expanded its higher-margin credit and advertising segments, and leveraged its economies of scale to dilute its logistics, payment processing, and marketing expenses.
Those growth rates are incredible, but some investors might be reluctant to buy MercadoLibre's stock after those multibagger gains. However, I believe buying MercadoLibre's stock today could still set you up for life for three simple reasons.
1. It hasn't saturated its core markets yet
MercadoLibre operates its marketplace in 19 Latin American countries. However, it generates most of its revenue in Brazil, Argentina, and Mexico -- and it still has plenty of room to grow in smaller markets like Chile, Colombia, Peru, and Ecuador.
At the end of 2024, MercadoLibre served more than 100 million annual unique active buyers and 60 million fintech monthly active users. But that's just a fraction of the 668 million people (including 451 million adults) who live in the Latin American and Caribbean region. Latin America's population is also expected to keep growing through 2050.
That low penetration rate gives MercadoLibre plenty of room to expand its e-commerce and fintech platforms. Grand View Research expects Latin America's e-commerce market to grow at a CAGR of 16.7% from 2024 to 2030. IMARC Group predicts the region's fintech market will expand at a CAGR of 15.9% from 2025 to 2033. If MercadoLibre stays at the top of those booming markets, it will likely generate double-digit sales growth for the foreseeable future.
2. It's growing a lot faster than its overseas competitors
From 2024 to 2027, analysts expect MercadoLibre's revenue and EPS to grow at a CAGR of 27% and 34%, respectively. That makes it one of the world's fastest-growing e-commerce companies. By comparison, analysts expect Amazon (AMZN -0.00%) and Sea Limited (SE 1.86%) -- which both tried in vain to challenge MercadoLibre in Latin America -- to grow their revenue at a CAGR of 11% and 21%, respectively, from 2024 to 2027.
3. It looks reasonably valued relative to its growth potential
MercadoLibre's stock has already rallied nearly 40% this year, but it still doesn't seem too pricey relative to its e-commerce peers at 35 times next year's earnings. Amazon trades at 29 times forward earnings, while Sea trades at a higher forward multiple of 40.
MercadoLibre's valuations are likely being compressed by the near-term concerns about tariffs, inflation, and political unrest across several of its top markets. The devaluation of Latin American currencies against the U.S. dollar (in which MercadoLibre reports its earnings) could be exacerbating that pressure. But if those headwinds eventually dissipate, MercadoLibre's stock could command a much higher valuation again.
How much bigger could MercadoLibre grow?
Assuming MercadoLibre matches analysts' expectations through 2027, grows its EPS at a robust CAGR of 20% over the following 18 years, and trades at a reasonable 30 times earnings by the final year, its stock price could potentially climb more than 30 times to $71,480 by 2045.
That price target sounds high, but it would only boost its market cap to $3.6 trillion. For reference, Amazon currently has a market cap of $2.4 trillion -- and it will likely be worth a lot more in 20 years. Therefore, if you expect MercadoLibre to maintain its leading position in Latin America's e-commerce and fintech markets, expand its margins as it scales up its business, and weather the region's near-term macro headwinds, then it's still an excellent long-term buy.
