If one turns on the news, MercadoLibre (MELI 0.30%) stock may look more like a sell than a buy. Cartel violence in Mexico or high inflation in Argentina call into question the stability of the business environment the company operates in, and indeed, the stock has sold off amid rising competition and an increase in bad loans.
However, investors should remember that the stock is up by around 6,000% since its initial public offering (IPO) in 2007. Amid those gains, the retail stock is likely not done rising, and three reasons explain why.
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1. MercadoLibre thrives despite (and because of) regional adversity
Despite the aforementioned issues, MercadoLibre has a history of thriving amid Latin America's problems, not merely in spite of them. This began when the company formed Mercado Pago to help its cash-based customers buy online.
Now, Mercado Pago also sells fintech services to other businesses and helps individuals with personal finances. For example, the company helped people cope with the aforementioned inflation in Argentina by turning its digital wallets into money markets that paid interest.
MercadoLibre also dealt with logistics challenges by forming Mercado Envios. This helps customers who sell online fulfill and ship orders. It also brought same-day or next-day shipping to Latin America, something that was previously not widely available in that part of the world.
Such innovations shield people from economic and political turmoil, thereby making MercadoLibre essential to the region's survival and improvement.
2. MercadoLibre continues to grow
Amid such transformation, the company continues to look more like an underground growth stock. In 2025, revenue of $25 billon increased by 36% compared to year-ago levels.
Admittedly, that did not translate into higher profit growth, as its $2 billion in net income for 2025 rose by only 5%. Part of that was the rise in sales and marketing spend to address rising competition and higher income tax expenses.
As previously mentioned, an increased number of non-performing loans has also slowed growth. However, the company has begun addressing the bad loans by using AI to evaluate potential loans. It has also imposed more limits on borrowed amounts to limit the potential for bad loans.
Additionally, even as e-commerce competition intensifies, business conditions have improved in key markets. Although Argentina's inflation has stopped falling recently, the triple-digit inflation appears to have ended, and inflation is at the lowest levels since 2017, which takes some pressure off consumers.
Furthermore, regime change in Venezuela appears to be reviving the economy in that country. Although the improvements may take some time, the higher incomes will almost certainly mean that customers will buy more from MercadoLibre.
3. Its valuation is reasonable
Admittedly, investors are slow to see those benefits as recent troubles have overshadowed the stock. Consequently, it is down by around 22% over the last year. Fortunately, its valuation has become more attractive given its price-to-earnings (P/E) ratio of 42. Indeed, that may seem high given the S&P 500 average of 30.
NASDAQ: MELI
Key Data Points
Still, long-term investors may recall that Amazon sold at a P/E ratio of 50 (and sometimes one above 100) in previous years. Hence, its earnings multiple appears to be consistent with its peer north of the border.
Moreover, the stock's forward P/E of 29 comes close to the market average. Given the continued rapid growth, one could argue that MercadoLibre's valuation is attractive for new investors.
Owning MercadoLibre stock
Ultimately, MercadoLibre gives investors three compelling reasons to buy the stock like there is no tomorrow.
Admittedly, it operates in a region constantly dealing with economic and political volatility. Nonetheless, it has turned the region's challenges into economic opportunities in many cases.
Additionally, revenue growth remains rapid, and its valuation is reminiscent of Amazon when it was a smaller company. Such conditions make the decline over the last year a likely anomaly, creating an increasingly attractive opportunity for investors to buy MercadoLibre stock.
