MercadoLibre's (MELI 6.67%) stock has stayed nearly flat this year. The Latin American e-commerce and fintech giant is still growing like a weed, but concerns about the region's macro headwinds and political instability seem to be compressing its valuation. Nevertheless, I believe it will bounce back in the near future for three simple reasons.
Image source: Getty Images.
Why will MercadoLibre's stock soar?
First, the company has plenty of room to grow. It served 76.8 unique active buyers in its latest quarter, but it still generates most of its revenue in Brazil, Argentina, and Mexico. It's expanding into higher-growth markets like Chile, Colombia, Peru, and Ecuador, and it might return to Venezuela (which it exited in 2017) after the recent U.S. military intervention.
NASDAQ: MELI
Key Data Points
Second, its fintech ecosystem -- including its Mercado Pago payments platform, credit, and digital banking services -- is expanding. It already served 72.2 million monthly active users across its fintech services in its latest quarter, and it should gain even more users as it rolls out more services, locks in more third-party merchants, and enters more countries.
Lastly, its profits are soaring as it expands its higher-margin third-party marketplace, credit, and advertising segments. Its operating expenses are also declining as economies of scale kick in.
From 2024 to 2027, analysts expect MercadoLibre's revenue and EPS to grow at CAGRs of 29% and 30%, respectively. It still looks reasonably valued at 30 times forward earnings, and it should attract more growth-oriented investors once the Latin American market stabilizes.
