With the S&P 500 (^GSPC +1.18%) at record highs, it's hard to find bargains on the market. But they always exist if you do a bit of digging.
Consider MercadoLibre (MELI +0.53%). It's a top e-commerce powerhouse, with high growth rates and expansive opportunities. But it's 30% off its highs and trading at a bargain valuation.
With the company scheduled to report earnings next week, is now the time to buy?
Why is MercadoLibre stock down?
MercadoLibre reported spectacular growth in the 2025 fourth quarter, an ongoing trend that hasn't abated for years. Revenue increased 47% year over year (currency neutral), and there was a plethora of positive signals all around.
The company has two core segments: e-commerce and fintech. The company's region, which includes 18 Latin American countries, is underdeveloped in both of these areas, giving it a long growth runway. It's the leading company in both of these segments in nearly all of the countries where it operates, and it's leveraging that lead to introduce new features that add value to its platform. "Both of these are increasingly supported by the tangible impact of our investments in artificial intelligence," said CFO Martín de Los Santos.
MercadoLibre is using artificial intelligence (AI) to create more efficient and accurate marketing campaigns, for example, driving a 67% increase in ad revenue. AI is also responsible for 87% of interactions on the Mercado Pago digital wallet without the need for human intervention.
Image source: Getty Images.
One impressive display of the company's innovation and excellence is in the adoption of a lower free shipping threshold in Brazil, one of its three largest markets. The e-commerce business there has accelerated in several ways, suggesting a cycle of long-term growth. New buyers since the change have bought more items in more categories than pre-change shoppers and have higher retention rates. Gross merchandise volume was up 35% year over year, and items sold were up 45%.
The thing is, all this innovation and investment comes at a price. And the market didn't like that price in the fourth quarter; operating and net profit margins were both lower year over year. Combined with global upheaval and continued inflation, the stock continued its nosedive.
NASDAQ: MELI
Key Data Points
What to expect next week
These look like short-term issues, although they can look scary to current shareholders. The company has experienced similar periods of short-term contraction in the past, including quarterly losses as it invested for the future. It has always rebounded in a big way.
The good news is that this has reset the price to be much more affordable. MercadoLibre stock trades at a P/E ratio of 47, just off a 10-year low. That's not an objectively low price, but it's an excellent price for a high-growth stock with massive opportunities.
No one knows what will happen next week, but if there's improvement on the bottom line, it's likely that the stock will jump. But don't buy it today for that; buy it because it could help create shareholder wealth for the long-term investor.
