Despite some challenges, broader equities have posted decent performances this year. MercadoLibre (MELI 3.16%) and Uber Technologies (UBER 1.38%) are two stocks that have performed even better than the market over the past seven months. As impressive as that may be, long-term investors will want to know whether these two companies can maintain that momentum over the long run.
My view is that they can, and here is why.
1. MercadoLibre
MercadoLibre is a leader in two rapidly growing industries: e-commerce and fintech. The company operates the largest online marketplace in Latin America where it has so far successfully fended off competition from major companies, including Amazon. MercadoLibre generates strong and growing revenue and profits. In the second quarter, the company's net revenue increased 34% year over year to $6.8 billion. The company's net income of $523 million declined slightly, partly due to currency-exchange rate fluctuations.
Still, most other key metrics for the company went up, including items sold, gross merchandise volume (GMV), unique buyers, and fintech monthly active users (MAUs).
Image source: Getty Images.
The e-commerce specialist also benefits from a moat from multiple sources, including switching costs and the network effect. In other words, the business is strong. Despite concerns that the economy might falter due to President Trump's tariffs -- something that could impact its financial results -- the stock has performed well this year. Over the next decade, MercadoLibre could benefit from the increasing shift to online retail worldwide, including in Latin America where it operates. Though estimates vary, some analysts see a compound annual growth rate (CAGR) of 15.3% through 2035 for e-commerce.
Perhaps it will grow even faster in areas where MercadoLibre operates. Only one of the company's major markets -- Mexico -- cracks the list of top 10 countries worldwide by e-commerce penetration, with a rate of 14.2%, which significantly trails the leaders at the top of this list. Other regions where MercadoLibre is well established, such as Brazil, are less mature markets than Mexico. In other words, this will be a massive tailwind for MercadoLibre.
Even with mounting competition from players like Shopee, backed by Sea Limited, and potential political instability, MercadoLibre should be fine. The company has faced and overcome these challenges before, and its moat should allow it to remain the leader of the pack. In short, the stock is well positioned to deliver superior returns through 2035.
2. Uber Technologies
Uber has become a household name thanks to its ultrapopular ride-hailing and food-delivery services. The company has achieved the feat of becoming a verb thanks to its brand name being synonymous with ordering a ride on an app, sometimes even if it is on one of its competitors' services.
That's nice enough, but more importantly for investors' purposes, Uber is delivering excellent financial results. In Q2, the company's total trips increased by 18% year over year to 3.3 billion, while its revenue rose to $12.7 billion, 18% higher than the same period last year.
Long gone are the days of unprofitable growth for Uber. On the bottom line, the company reported a net profit of $1.4 billion, up 33% year over year, while its free cash flow increased by 44% year over year to $2.5 billion. Uber is firing on all cylinders. And there is plenty more where that came from.
Member growth should continue, considering Uber ended Q2 with 180 million monthly active consumers. While that grew 15% year over year, it still represents a small fraction of the population in the regions where it does business.
Uber's major markets are still severely underpenetrated, granting the company significant long-term growth potential to bring more people into its ecosystem, increase trips and gross bookings, as well as revenue and earnings. And while competition remains fierce, Uber has built a network effect which, along with its brand name, grants it a moat. Lastly, although the rise of self-driving vehicles could pose a threat, Uber has taken the lead by partnering with Waymo, a leading company in this niche.
With excellent financial results, multiple growth paths, and a moat, the stock could be a major winner over the next decade.
