Mercado Ads Scales Up: Can it Become MELI's Third Growth Engine?

MercadoLibre MELI is expanding its ecosystem with increasing momentum in digital advertising, positioning Mercado Ads as a strong candidate for its next core growth engine. Mercado Ads helps sellers and brands reach millions of shoppers on and off MELI’s platform using its first-party data for precise targeting. It offers Product Ads, Brand Ads, Display Ads and Video Ads, with Display and Video also shown outside MELI’s ecosystem.

Brand ads have seen strong growth after being expanded beyond top brands to more sellers. Display ads followed a similar path, growing more than 100% year over year in the first quarter of 2025. These gains are supported by new features like automated creative generation and improved analytics, which have made the ad tools more effective and widely accessible across the platform.

The company took a bold step in the first quarter by launching Mercado Play, its TV streaming app, on more than 70 million smart TVs. With 15,000-plus hours of free content, the app targets a region where less than half the population pays for streaming, unlocking untapped ad inventory and creating value for users, content studios and Mercado Ads, especially in video.

Now a $1 billion-plus annual revenue business, Mercado Ads grew nearly 50% year over year on an FX-neutral basis in the first quarter of 2025. Display ad revenues more than doubled, and its share of total ad revenues rose 10 percentage points year over year. Ad penetration increased across Brazil, Mexico and Argentina. MercadoLibre believes this is only the beginning of a much larger opportunity in Latin America's digital ad market.

MELI Competes for Ad Spend in Latin America

As Latin America’s digital ad market expands, Mercado Ads is facing stronger competition from global players like Amazon AMZN and Sea Limited SE. Both are stepping up efforts to capture ad spend in MELI’s key markets.

Amazon is growing its ad business in Brazil and Mexico, offering tools like Sponsored Products through its LATAM hub. With brand support and access to millions of Amazon shoppers, it’s becoming a major draw for regional and global sellers.

Shopee, backed by Sea Limited, is expanding in Latin America with new tools for brands and low-cost ad options. Focused on price-sensitive and mobile-first sellers, especially in Brazil, Sea Limited’s Shopee’s rising presence adds further pressure on MELI’s hold over regional ad dollars.

MELI’s Share Price Performance, Valuation and Estimates

MELI shares have gained 50.6% in the year-to-date (YTD) period, outperforming the Zacks Internet – Commerce industry and the Zacks Retail-Wholesale sector’s growth of 5.7% and 2.8%, respectively.

MELI’s YTD Price Performance

From a valuation standpoint, MELI stock is currently trading at a forward 12-month Price/Sales ratio of 4.20X compared with the industry’s 2.01X. MELI has a Value Score of D.

MELI Valuation

The Zacks Consensus Estimate for second-quarter 2025 earnings is pegged at $12.01 per share, which has remained steady over the past 30 days, indicating 14.60% year-over-year growth.

MercadoLibre, Inc. Price and Consensus

MercadoLibre, Inc. price-consensus-chart | MercadoLibre, Inc. Quote

The consensus mark for 2025 earnings is pegged at $47.75 per share, which has been revised downward by 1.9% over the past 30 days. The estimate indicates 26.69% year-over-year growth.

MercadoLibre currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here. 

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

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