MercadoLibre vs. eBay: Which Marketplace Stock is the Better Buy?

MercadoLibre MELI and eBay EBAY are two prominent marketplace stocks, but their approaches to connecting buyers and sellers couldn’t be more different. While both platforms aim to facilitate seamless online commerce, eBay operates as a mature, global player with a long-established user base, whereas MELI is focused on high-growth markets in Latin America, tailoring its ecosystem to local needs. A marketplace’s success depends on how well it serves both buyers and sellers, and these companies are executing on that in very distinct ways.

As the global e-commerce market continues to evolve, the key question for investors is: Which of these marketplace giants offers better long-term value? Let’s take a closer look to find out.

The Case for MELI Stock

MercadoLibre has built a strong, seller-focused ecosystem designed to meet the specific needs of businesses in Latin America. Tools like MyPage, where sellers can customize storefronts, group products, and connect with potential buyers directly, are gaining prominence. Additional features like the dynamic pricing tool, which automates price adjustments based on competitiveness within and outside the MELI marketplace, are helping the sellers improve their market positioning.

Furthermore, MELI has demonstrated exceptional cash profitability, with cash flow from operating activities rising consistently over the past four years. In 2024 alone, it generated $7.92 billion in operating cash flow, indicating a 54.05% year-over-year increase. This growth is fueled by a near doubling of net income to $1.91 billion and a 38% rise in revenues to $20.77 billion. These strong results highlight MELI’s operational efficiency and reinforce its ability to sustain long-term profitability.

Supporting this performance is a strong balance sheet, with $2.63 billion in cash and cash equivalents and $1.05 billion in short-term investments as of Dec. 31, 2024. This strong liquidity position gives the company the flexibility to pursue strategic initiatives, including potential acquisitions and long-term growth opportunities.

Looking ahead, growth expectations remain positive. The Zacks Consensus Estimate for 2025 earnings is pegged at $47.50 per share, which has remained steady over the past 30 days, indicating 26.03% year-over-year growth. The consensus mark for revenues is pinned at $25.89 billion, implying year-over-year growth of 24.59%.

Find the latest earnings estimates and surprises on Zacks Earnings Calendar.

The Case for EBAY Stock

eBay has been keeping up with the times by leveraging generative AI technology through several tools designed for sellers. The majority of its sellers are now using tools like Magical Listing, AI-enhanced product backgrounds and automated social media posting. The company’s eBay balance feature for C2C sellers in the United Kingdom is gaining popularity. It enables the sellers to use their earnings to purchase products on eBay and cover various selling needs, such as shipping labels and promoted listings. 

However, eBay has been struggling with new customer acquisition over the last two years. Despite the ongoing growth in Internet usage and the availability of new market opportunities, eBay has struggled to keep up, with active buyers declining 2% in 2023 and then increasing just 1% in 2024. As of the fourth quarter of 2024, the company reported 134 million active buyers, which is a sign that its customer acquisition efforts have lost momentum in recent years. 

To counter this, eBay has introduced a few buyer-focused tools like AI-powered discovery features, Explore and Shop the Look, and enhanced its C2C experience with improved search, buyer protection, and simplified checkout to re-engage users and attract new ones.

In terms of cash generation, eBay’s cash flow from operating activities has been on a downward trend over the past four years, with 2024 generating $2.41 billion, indicating a 0.49% year-over-year drop. This contrasts with an 8% year-over-year rise in non-GAAP net income to $2.45 billion and a 2% year-over-year revenue increase to $10.3 billion. Despite earnings growth, the cash flow dip raises concern about earnings quality and operational efficiency. If this trend continues, it could undermine eBay’s long-term growth.

For 2025, the consensus mark for earnings is pinned at $5.30 per share, which remained unchanged over the past 30 days, suggesting 8.61% growth from 2024. The consensus mark for revenues is pegged at $2.55 billion, implying a decline of 0.29% year over year.

Stock Price Performance and Valuation of MELI and EBAY

In the trailing 12 months, MELI shares have gained 31.4%, higher than the appreciation of 19.4% in EBAY shares. Both have outperformed the Zacks Internet-Commerce industry’s decline of 10.1%.

MELI Outperforms EBAY, Industry in 1-Year

From a valuation perspective, MELI trades at a forward 12-month Price/Sales ratio of 3.64, which exceeds the Zacks Internet-Commerce industry’s average of 2.01. EBAY trades at a seemingly more attractive forward 12-month Price/Sales ratio of 2.72. However, MELI’s valuation reflects its strong growth trajectory and solid profitability. If the company continues to execute well, its premium may be justified.

Valuation of MELI and EBAY

On the contrary, eBay’s disconnect between earnings and cash flow raises questions about its ability to capitalize on its marketplace potential. Without consistent operational efficiency, its future earnings growth may face significant pressure.

Why MELI Stock Offers a Better Investment Opportunity

Unlike eBay, which is facing stagnant user growth and declining operating cash flow, MELI is rapidly scaling its user base and delivering consistent profitability. Its robust ecosystem, enhanced by advanced seller and buyer tools, has significantly boosted engagement and transaction volume. Looking ahead in 2025, MELI plans to increase investments in Mexico by 38% and Brazil by 48%, leveraging its strong cash flow and solid balance sheet to fuel further growth. 

Given MercadoLibre’s superior execution and successful market penetration in Latin America, it stands out as the better investment choice in 2025.

MELI currently carries a Zacks Rank #2 (Buy), whereas eBAY has a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 (Strong Buy) Rank stocks here.

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This article originally published on Zacks Investment Research (zacks.com).

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