This Low-Priced Stock Has Amazon-Like Potential. Here's Why.

Amazon (NASDAQ: AMZN) has been one of the best-performing stocks ever on the stock market. It has gained more than 230,000% since its first-day closing price, which means that if you'd invested $1,000 at that time, you'd have $2.3 million today.

However, most investors won't be able to invest on the first day of an initial public offering (IPO), and today, hyped-up IPO stocks often soar before falling. The good news is, you don't have to invest at the IPO to see your investment skyrocket. If you'd invested $1,000 in Amazon stock five years after its IPO, you'd have $275,000 today. Not quite the same, but still an impressive gain.

Amazon stock still has formidable opportunities today, but there are younger stocks that may have even more potential right now. Consider MercadoLibre (NASDAQ: MELI), a very Amazon-like stock that could deliver Amazon-like gains.

A powerhouse e-commerce company

While Amazon is a global company serving global regions, it doesn't have the same control over the global e-commerce market that it has in the U.S. It has made a recent push to capture market share in Latin America, but it faces considerable competition from MercadoLibre, which already has a dominant position in the region. Analysts estimate that MercadoLibre controls 30% of the e-commerce in Latin America, up from 25% in 2022, and its sales are more than its 15 closest competitors combined.

What's significant about the opportunity in Latin America is that it's still underpenetrated as compared with other global regions. E-commerce accounts for just 15.2% of retail sales in Latin America, in contrast with 30.1% in the U.S. and 39.4% in China. That gives MercadoLibre a huge growth runway, and it's signaling interest from the competition because there's still so much up for grabs.

MercadoLibre is best placed to benefit from the shift as it creates a strong value proposition, encouraging more customers to get onto its platform. It recently lowered some of its delivery fees in certain areas, which is attracting new customers and increasing engagement. It's also using artificial intelligence (AI) to power search and drive conversions.

It's also doing some innovative marketing that's bringing people to its platform. For example, it sponsors a free streaming app funded entirely by its advertising business.

As more people try e-commerce, MercadoLibre is more likely to expand its market share and widen its edge over any competition.

More than e-commerce

Like Amazon, MercadoLibre has expanded its platform in new directions, varying its revenue streams and providing new opportunities.

It has developed a robust fintech business that has expanded from digital payments to pay for marketplace purchases to a complete financial services app with credit cards, bank accounts, and more. It has more than 60 million monthly active users, and that number has been rising by about 30% year over year every quarter. This is an area that's also completely open in Latin America, where digital penetration has a ways to go and there are barriers to access in finance for lower-income populations.

MercadoLibre's advertising business is similar to Amazon's, using its vast marketplace as a platform for advertisers to reach target consumers, and the company has already become the third-largest digital media company in its region.

On top of the revenue that comes from these other businesses, they serve to create a cohesive ecosystem where users can shop, pay, and manage other financial transactions all through the MercadoLibre platform. The company also has its own managed fulfillment infrastructure that makes for more seamless transactions and quicker deliveries, bringing together all the pieces of its business.

Is MercadoLibre stock cheap?

MercadoLibre has incredible long-term opportunities as it disrupts the status quo along multiple fronts in Latin America. It has already delivered strong gains for shareholders, but there could be so much more.

However, it trades at only 20 times trailing-12-month free cash flow. Not only is that objectively cheap, it's also below its three-year average.

MELI Price to Free Cash Flow data by YCharts

MercadoLibre is likely to continue to be a standout stock, and now looks like a great entry point.

Jennifer Saibil has positions in MercadoLibre. The Motley Fool has positions in and recommends Amazon and MercadoLibre. The Motley Fool has a disclosure policy.