MercadoLibre, Inc. (MELI): A Bull Case Theory

We came across a bullish thesis on MercadoLibre, Inc. on Expanse Stocks’s Substack by Nikotes. In this article, we will summarize the bulls’ thesis on MELI. MercadoLibre, Inc.'s share was trading at $2,268.60 as of January 28th. MELI’s trailing and forward P/E were 56.02 and 34.13, respectively according to Yahoo Finance.

MercadoLibre, Inc. operates online commerce platforms in Brazil, Mexico, Argentina, and internationally. Mercado Libre’s third-quarter 2025 results highlight a deliberate, long-term strategy that prioritizes competitive dominance over short-term margin optics, reinforcing why exceptional businesses can justify temporary margin compression. Investors focused on the year-over-year decline in Direct Contribution margins, particularly in Brazil, missed the broader picture: Mercado Libre intentionally lowered its free shipping threshold from R$79 to R$19 to accelerate scale in its largest and most strategic market.

The outcome was a sharp re-acceleration in growth, with Brazilian user growth reaching 29% YoY, items sold accelerating to 42% YoY, and FX-neutral GMV growing 34%. Crucially, despite a 28% QoQ surge in shipment volumes, unit shipping costs in Brazil declined 8% QoQ in local currency, demonstrating powerful operating leverage and a logistics advantage that competitors struggle to replicate. This investment fed the broader ecosystem flywheel, driving record marketplace traffic, accelerating high-margin advertising revenue by 63% YoY, and expanding Mercado Pago’s user base and credit portfolio, which now exceeds 27 million users and $11 billion while maintaining stable credit quality.

Deepening engagement was evident as the share of users treating Mercado Pago as their primary financial account rose meaningfully in Brazil. Beyond Brazil, Mexico and Argentina delivered solid growth, underscoring the company’s geographic diversification and resilience. While near-term margin pressure, competitive intensity, and macro volatility—particularly in Argentina—remain risks, the scale efficiencies, ecosystem synergies, and disciplined capital allocation suggest these investments are likely to generate returns well above the cost of capital. Overall, the quarter showcased Mercado Libre strengthening its structural advantages and reinforcing its long-term compounding story despite near-term margin noise.

Previously, we covered a bullish thesis on MercadoLibre, Inc. (MELI) by Daan | InvestInsights in May 2025, which highlighted the company’s dominant e-commerce and FinTech positions in Latin America, strong user growth, and robust profitability metrics. MELI’s stock price has depreciated by approximately 12.23% since our coverage due to regional macro volatility and valuation pressures. Nikotes shares a similar perspective but emphasizes Brazil-focused margin compression to accelerate scale and strengthen ecosystem engagement.

MercadoLibre, Inc. is not on our list of the 30 Most Popular Stocks Among Hedge Funds. As per our database, 109 hedge fund portfolios held MELI at the end of the third quarter which was 116 in the previous quarter. While we acknowledge the risk and potential of MELI as an investment, our conviction lies in the belief that some AI stocks hold greater promise for delivering higher returns and doing so within a shorter time frame. If you are looking for an AI stock that is more promising than MELI and that has 10,000% upside potential, check out our report about this cheapest AI stock.

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Disclosure: None.