MercadoLibre (MELI 4.13%) has become one of the more prosperous companies in Latin America by turning challenges into revenue streams. The company pounced on the opportunity in online commerce early and then created businesses to address the lack of fintech and logistics options in the region.
More recently, its stock has suffered as its success brings emerging challenges. Knowing that, MercadoLibre stock investors need to keep an eye on two key areas, and addressing those could change the outlook on the stock in 2026 and beyond.
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1. High loan defaults
MercadoLibre's fintech arm, Mercado Pago, has arguably eclipsed its original online selling business in many respects. Its solutions allowed unbanked customers to buy online, and its investment and lending options have become increasingly popular. However, it is lending that has weighed on the stock more recently. Credit risks have risen as bad debt mounts, and this became more apparent to investors when they reported third-quarter financials.
During the first nine months of 2025, revenue rose 37% year over year to $20 billion. While impressive, that fell short of the 58% rise in the provision for doubtful accounts over the same period. Thus, the net income during that same time frame was $1.4 billion, up only 13% from year-ago levels.
That slower profit growth may be the most significant reason MercadoLibre stock is up by just over 20% in 2025, a rate of increase below what one might expect given its revenue growth. Indeed, expanding credit is part of Mercado Pago's growth strategy, but it will probably have to more precisely identify bad credit risks to succeed.
NASDAQ: MELI
Key Data Points
2. E-commerce competition
On the e-commerce side of the business, more companies are trying to chip away at MercadoLibre's market share.
Amazon is competing more actively in Brazil and Mexico, and Sea Limited continues to try to make inroads in Brazil despite failing in other markets outside of Southeast Asia. Moreover, local e-commerce platforms and regional marketplaces have emerged in specific markets.
Such peers can put further pressure on margins in an already competitive business. Still, MercadoLibre's competitive advantages can mitigate some of the adverse effects of this competition.
In addition to Mercado Pago's payment solutions, the company operates a logistics arm called Mercado Envios. This helps the company ship goods at a lower cost and often at faster speeds. Mercado Envios can also fulfill orders for merchants, which may help it attract product lines from competing sites.
Hence, while competitors present a threat to this business, MercadoLibre has the tools to at least hold its own in e-commerce.
MercadoLibre going forward
Despite its challenges, MercadoLibre continues to effectively capitalize on its first-mover advantage in Latin American fintech and e-commerce.
Admittedly, it needs to reduce the number of loans that consumers do not pay back. Also, local e-commerce sites and e-commerce conglomerates from other regions could put a dent in the success MercadoLibre has had in selling online.
Nonetheless, MercadoLibre remains a market leader that continues to generate rapid revenue growth. Thus, investors should treat the above challenges as concerns, but at this time, they should not change bullish outlooks on the future of MercadoLibre.
