How MercadoLibre works. Source: MercadoLibre.

For years, Latin America enjoyed nearly straight-up growth, as investors gravitated toward emerging markets and saw the huge potential in South American countries like Brazil and Argentina. Using a business model U.S. investors were quite familiar with, MercadoLibre (NASDAQ:MELI) rose to notoriety and great success.

Yet as economic growth became more sluggish early last year, many investors worried that MercadoLibre's best days might soon be behind it. Ongoing currency concerns have plagued the company, but as it prepares to release its fourth-quarter results on Wednesday afternoon, MercadoLibre has seen its stock rebound sharply; many believe it can overcome tough conditions and even turn them to its benefit. Let's take an early look at MercadoLibre and what 2015 might hold for the online marketplace.

Stats on MercadoLibre

Analyst EPS Estimate


Change From Year-Ago EPS


Revenue Estimate

$149.88 million

Change From Year-Ago Revenue


Earnings Beats in Past 4 Quarters


Source: Yahoo! Finance.

Can MercadoLibre set its earnings free?
In recent months, investors have grown much more optimistic about MercadoLibre's earnings, boosting their full-year 2015 projections in particular by almost 8%. The stock has seen mixed performance, though, falling about 2% since mid-November.

Despite its recent stagnation, MercadoLibre shares soared 20% in late October and early November following the release of its third-quarter results. Revenue jumped 20% from the year-earlier quarter, and when you isolate the currency impact on sales, MercadoLibre saw even faster growth in many of its segments. Local-currency revenue in Brazil was up 49%, and excluding Venezuela, overall revenue in currency-neutral terms jumped 59%. Net income more than doubled in local-currency terms, and the company beat estimates for earnings per share by more than a dime as user counts soared.

One of the keys to MercadoLibre's success has been its MercadoPago payment service. Just as eBay (NASDAQ:EBAY) has seen huge gains from its PayPal unit, MercadoPago has paid huge dividends for MercadoLibre. In its most recent quarter, total payment transactions soared more than 20% from the previous quarter to 12.5 million, and the company has also worked to become an e-commerce partner for well-known retailers in Latin America. Now, MercadoLibre counts 364 stores in Brazil, Mexico, and Argentina, helping to broaden its reach. At the same time, the MercadoEnvios shipping initiative has improved the customer experience for its online marketplace, making its entire portfolio of e-commerce offerings stronger.

MercadoLibre's broader business model. Source: MercadoLibre.

MercadoLibre also offers a much different investor experience than most emerging-market investors get from Latin America. Many of the exchange-traded funds that feature Latin American stocks focus on natural resources companies, most of which have gotten hit hard by slowing global demand and the resulting plunge in commodities prices. By contrast, the rise of the consumer middle class in Latin America continues largely unabated, and MercadoLibre stands in a prime position to benefit from the ongoing success of that rising demographic group.

Source: MercadoLibre.

Still, investors should expect the company to respond to local political pressures. For instance, Argentine President Cristina Fernandez de Kirchner will finish her final term of office later this year, with elections scheduled for October. The country's debt crisis has sent ripples throughout its stock market, and even with favorable prospects from its geographically diversified business, MercadoLibre still sees some impact from volatility in the Argentine and Brazilian stock markets.

In the MercadoLibre report, watch closely for signs of how well the company's various focus areas perform. In particular, MercadoPago has the potential to gain huge stature in facilitating payments across the region, extending well beyond the reach of the company's namesake marketplace. If MercadoLibre can duplicated what eBay has done with its business, then it should be able to weather macroeconomic uncertainty and end up on top in the long run.