MercadoLibre: Dominant E-Commerce and Fintech Platform in Latin America

Deep Dive into $MELI: Valuation, Segment Growth, Key Metrics, Profitability, Expenses, Product Launches, Customer Acquisition, Financial Stability, SBC/Revenue, and Shareholder Dilution.

MercadoLibre: Company overview

About MercadoLibre
MercadoLibre is the largest e-commerce and fintech ecosystem in Latin America. Founded in 1999 by Marcos Galperin, the company went public in 2007, becoming the first Latin American tech firm listed on NASDAQ. Headquartered in Montevideo, Uruguay, MercadoLibre operates in 18 countries across the region. In 2024, it reported $20.78 billion in revenue, $1.91 billion in net income, and employed 84,207 people.

Company Mission
MercadoLibre’s mission is to democratize commerce and financial services in Latin America through technological innovation. The company is transforming digital commerce by expanding its integrated ecosystem of e-commerce, payments, logistics, and fintech services.

Sector
Operating in the e-commerce and fintech sectors, MercadoLibre has developed a diversified business model. Key components include:

1. Marketplace (Mercado Libre)

2. Payment solutions (Mercado Pago)

3. Logistics (Mercado Envios)

4. Financing

5. Advertising

6. Software services

Competitive Advantage
The company’s moat is built on an integrated ecosystem that combines e-commerce, payments, logistics, and credit into a unified platform, increasing customer lifetime value. A strong network effect helps attract more sellers and buyers. Its first-mover advantage established leadership in core markets. Mercado Envios, the proprietary logistics network, enables faster, more reliable deliveries. The company also leverages extensive consumer data and machine learning to personalize experiences and optimize operations.

Total Addressable Market (TAM)
MercadoLibre's TAM is estimated at $1 trillion, with expected 15% annual growth over the next five years. Key growth drivers include expanding e-commerce in Latin America, rising internet penetration, a growing middle class, and increased platform adoption.

In Brazil, one of MercadoLibre’s core markets, e-commerce penetration is projected to reach 16.6% in 2024, signaling significant upside. The Latin American e-commerce segment is forecasted to grow 10% faster than the global average, reinforcing long-term potential.

Valuation

$MELI MercadoLibre is trading at a Forward EV/Sales multiple of 3.9, significantly below the average of 6.9 and near the valuation lows of 2019 and 2020. At the beginning of 2024, the Forward EV/Sales was 3.7.

$MELI MercadoLibre is trading at a Forward P/E multiple of 41.5.
The EPS growth forecast for 2026 is 38.4%, with a P/E of 40 and a 2025 PEG ratio of 1.04.
The EPS growth forecast for 2027 is 30.7%, with a P/E of 29 and a 2024 PEG ratio of 0.9.

Based on the PEG multiple, MercadoLibre is trading in the undervalued category.

The PEG (Price/Earnings to Growth) ratio is a key tool for evaluating growth stocks, introduced by Peter Lynch.

PEG < 1: Undervalued – A ratio below 1 suggests the stock is undervalued. For example, if the P/E is 15 and earnings are expected to grow by 20%, the PEG would be 0.75, indicating a good buying opportunity.

PEG = 1: Fair Value – A PEG of 1 means the stock price matches its growth expectations, representing fair value.

PEG > 1: Overvalued – A PEG above 1 indicates the stock may be overvalued, as its price is higher than its projected growth rate, making it riskier.

Valuation comparison

Analysts' revenue growth forecast for $MELI in 2025 is +27%, and in 2026 +23.6%. Considering this forecast, the valuation based on the P/S multiple appears to be undervalued compared to other companies in the e-commerce sector.

Analysts expect strong revenue growth, so let's examine the key metrics to determine whether these expectations are justified.

We'll evaluate the company's economic moat, which supports long-term revenue growth, analyze revenue trends and the forecast for next quarter, and identify key factors that could help the company exceed expectations and sustain future growth.

We'll assess the performance of key segments, the launch of new products and updates, customer acquisition growth, key financial metrics, financial stability, and margin trends.

Additionally, we'll review the SBC/Revenue ratio, shareholder dilution, and finally, draw conclusions on the company's outlook.

Economic Moat

MercadoLibre has built a powerful competitive moat. Its very strong economies of scale are driven by a proprietary logistics network and MELI Air. A massive network effect from 218M+ users and 1M+ sellers fuels growth and platform synergy. The brand is highly trusted across Latin America, supported by a first-mover advantage in key markets. Strong intellectual property enhances personalization and efficiency through proprietary tech and data. High switching costs lock in users through a deeply integrated ecosystem of services.

Economies of Scale
MercadoLibre has developed strong economies of scale through its expansive fulfillment network, Mercado Envios, which shipped over 1.1 billion items in 2022. Its logistics infrastructure spans multiple Latin American countries, enabling faster, more reliable deliveries while reducing reliance on third-party carriers. The company operates its own airline, MELI Air, further boosting distribution capabilities. These scale efficiencies present significant barriers to entry, reflected in the company’s dominance: $34 billion GMV vs $8 billion for Americanas, and 667.7 million monthly visits vs 169 million for Amazon. Scale strength: Very Strong

Network Effect
MercadoLibre benefits from a powerful network effect across its ecosystem. With over 218 million active users and 1 million active sellers across 18 countries, every new participant enhances the platform’s value. More buyers attract more sellers, which attracts more buyers—creating a self-reinforcing flywheel. This advantage spans its integrated ecosystem of e-commerce, payments, logistics, and credit, maximizing customer lifetime value and reinforcing growth across multiple layers. Network effect strength: Exceptional

Brand
Founded in 1999, MercadoLibre is the most recognized e-commerce brand in Latin America. Its first-mover advantage helped build strong brand equity and trust in core markets like Brazil, Mexico, and Argentina. This recognition translates to customer loyalty and continued market leadership, despite pressure from global competitors. The brand has also successfully expanded into fintech through Mercado Pago and Mercado Credito. Brand strength: Very Strong

Intellectual Property
MercadoLibre has built robust intellectual property around proprietary platforms, algorithms, and data infrastructure. The company uses advanced machine learning and vast consumer data to deliver personalized experiences, optimize logistics, and enhance credit models. This enables deeper insight into local markets than foreign competitors can match. Ongoing investment in technology further strengthens a knowledge moat that’s difficult to replicate. Intellectual property strength: Strong

Switching Costs
MercadoLibre has created high switching costs for both buyers and sellers through its integrated services. Sellers rely on the platform for marketplace access, payments, logistics, financing, and advertising. Leaving would require rebuilding their operations elsewhere. For buyers, the convenience of shopping, payments, and credit in one ecosystem, along with stored transaction history, reviews, and preferences, makes switching time-consuming. Fintech features like stored payment info, credit history, and loyalty benefits further reinforce user retention. Switching cost strength: Strong

Revenue growth

Revenue growth for $MELI MercadoLibre accelerated to 37% YoY, up from 35% in Q3.

In Q1 2024, the company announced changes to its revenue calculation and began providing adjusted data starting from Q1 2023. Revenue growth remains at a high level, although the company does not provide revenue guidance for the next quarter.

Segments and Main Products

MercadoLibre operates through two main business segments: Commerce, contributing 59% of total revenue, and Fintech, accounting for 41%. Commerce includes the marketplace, logistics, and advertising, while Fintech covers payments and credit services.

Marketplace (MercadoLibre)
MercadoLibre’s core marketplace, launched in 1999, is a fully automated platform that connects millions of buyers and sellers across Latin America. It spans categories such as electronics, fashion, home goods, health and beauty, and automotive. Third-party sales contribute 46% of total revenue, and first-party sales contribute 10%.

Payments (Mercado Pago)
Launched in 2003, Mercado Pago is an integrated digital payments platform supporting credit cards, debit cards, bank transfers, and digital wallets. It processes transactions both on and off the marketplace and now contributes 26% of total revenue. Payment services have expanded into physical retail, increasing platform reach.

Logistics (Mercado Envios)
Mercado Envios offers nationwide fulfillment and warehousing. In 2022, it shipped over 1.1 billion items using a combination of owned infrastructure and third-party carriers. The company operates its own airline, MELI Air, which strengthens distribution speed and reach.

Credit (Mercado Credito)
Mercado Credito provides installment payments for buyers and working capital loans for sellers, making financial services accessible across Latin America. Credit services generate 17% of total revenue. Lending terms are based on user profiles and behavior data, improving credit underwriting accuracy.

Advertising (Mercado Ads)
Mercado Ads enables sellers to promote products via sponsored listings and display ads within both the e-commerce platform and Mercado Pago. The ad infrastructure supports visibility and performance-based marketing for brands and merchants.

Shops (Mercado Shops)
Mercado Shops, launched in 2012, allows small and medium businesses to create independent online stores with social media integration. Merchants using this platform gain access to MercadoLibre's full ecosystem, including payments, logistics, and fulfillment, similar to Shopify’s offering but tailored to the Latin American market.

Main Products Performance in the Last Quarter

$MELI MercadoLibre's revenue breakdown by segment: The Commerce segment increased from 55% two years ago to 59% of total revenue. Fintech now makes up 41% of total revenue.

$MELI's Commerce segment.

Commerce revenue reached $3,554 million in Q4 2024, growing +44.4% YoY or +105.9% FX-neutral, with growth accelerating over the past two years. Commerce revenue is growing faster than total revenue.

Successful sold items totaled 525 million, a +27.0% YoY increase.

GMV (Gross Merchandise Volume) represents the total value of goods sold on the platform during a given period. It indicates transaction scale but does not account for fees or returns. GMV reached $14,549 million, growing +8.2% YoY or +79.5% FX-neutral. Since commerce revenue is growing faster than GMV, it signals that the company is generating more revenue from the same volume of goods.

The Commerce Take Rate—the percentage of each transaction charged to sellers—continues to increase and reached 24% in Q4, up +6 percentage points YoY. It remains a key revenue driver for MercadoLibre’s e-commerce business.

$MELI MercadoLibre’s unique marketplace buyers reached 67.3 million, growing +24% YoY, with 6.3 million new buyers added in Q4 2024—a record for new buyer additions in a single quarter.

Marketplace growth was driven by buyer acquisition and user engagement across categories. Unique buyers surpassed 100 million for the first time, signaling accelerating penetration in key markets like Brazil, Mexico, and Argentina. A record number of new buyers joined the platform, supported by infrastructure expansion and UX improvements.

Fashion and beauty saw major upgrades—virtual try-ons, better returns, and streamlined sizing. Supermarket vertical was strengthened by Full Super, a dedicated grocery page that improved navigation and re-ordering. Essentials and consumables are gaining share, while electronics and apparel continue strong performance.

Logistics saw significant investment. New fulfillment centers and free shipping expansion supported a 29% YoY increase in items shipped. Cost per package either declined or increased below inflation due to routing optimizations and warehouse productivity gains. Q4 saw record shipments per route.

Advertising revenue rose by 50bps as a percentage of GMV YoY. Monetization still lags global peers, but MercadoLibre is building brand relationships, improving tech infrastructure, and testing full-funnel ad solutions (video, brand, display). External ad inventory and agency partnerships are strategic focus areas.

$MELI MercadoLibre Fintech segment.

MercadoLibre's Fintech segment reported $2,505 million in revenue for Q4 2024, growing +28.6% YoY or +83.5% FX-neutral. Revenue growth accelerated from +20.8% in Q3 2024. Since Q1, the company has adjusted the way it calculates Fintech revenue.

TPV (Total Payment Volume) represents the total value of payments processed across the platform and reflects the scale of financial activity. TPV reached $58,914 million, growing +32.5% YoY or +49.2% FX-neutral, outpacing revenue growth in the segment.

The Fintech Take Rate—the percentage of each financial transaction earned as revenue—was 4.3%, stable from the previous quarter but slightly down -0.1 percentage points YoY. This includes fees from payment processing, digital wallets, loans, and cross-border transfers.

$MELI MercadoLibre's Fintech Monthly Active Users reached 61.2 million, growing +34% YoY, with 5.2 million new users added in Q4 2024—a record for quarterly user additions.

Fintech platform surpassed 60 million monthly active users. Payment ecosystem strengthened through better integration with commerce, credit issuance, and investment services. Funding from within the ecosystem now contributes 18%–25% of marketplace payments, depending on the country.

Merchant payment processing times improved via tech upgrades, leading to higher NPS. Open finance enabled better underwriting and higher credit limits for merchants. Ecosystem engagement supported strong cross-sell into financial services.

Argentina saw reacceleration. Growth in payment usage tied to macro stabilization, lower inflation, and reduced rates. Fintech services in Argentina benefited from low credit penetration and user trust built through ecosystem usage.

$MELI Credit Portfolio.

MercadoLibre's Credit Portfolio reached $6,573 million, growing +74% YoY. In the event of deteriorating economic conditions in Latin America, the credit portfolio could pose a risk, making it essential to monitor the percentage of NPLs (non-performing loans).

NPLs represent loans in default—those with overdue payments—and are a key indicator of the health of MercadoLibre's credit business, which offers financing to both consumers and merchants.

• NPLs 15–90 days overdue stand at 7%, down 2 percentage points YoY.

• NPLs over 90 days are at 18%, down 1 percentage point YoY.

• Total NPLs over 15 days are at 25%, down 2 percentage points YoY.

The most concerning category is NPLs >90 days, which had previously climbed to 30% in Q3 and Q4 2022, but have since improved to 18%. Overall, NPL trends across all segments are positive, which is encouraging.

NIMAL (Net Income Margin After Logistics) is a metric used by MercadoLibre to evaluate profitability after logistics costs. It reflects the platform’s efficiency in managing fulfillment and delivery expenses, which are critical in e-commerce.

While NIMAL had been gradually declining, it rose to 28% in Q4 2024, up from 24% in Q3. Despite a 12 percentage point decline YoY, it remains strong at around 30%, signaling solid operational efficiency.

Credit portfolio expanded with credit cards up +118% YoY, now the largest component of the book. Over 5.9 million new credit cards issued in 2024. Older cohorts are now profitable after two years, and new cohorts show improved repayment behavior.

Brazil credit quality remains solid despite higher rates. December saw the lowest first-payment default on record for credit cards. Issuance of riskier micro cards reduced, and underwriting for lower-score segments tightened. Duration of credit portfolio remains short, providing flexibility to adjust exposure.

Argentina credit portfolio grew 4x YoY, fueled by falling rates and low NPLs. No banking license required to scale lending, as securitizations fund loan growth. Cautious stance maintained due to Argentina’s historical volatility, but asset quality currently favorable.

NIMAL declined mainly due to mix shift to credit cards. However, NIMAL improved sequentially, reflecting lower provisions and higher returns on maturing cohorts. Credit provisioning moderated due to slower sequential portfolio growth (+9% in Q4 vs +23% in Q3), seasonal repayments, and improving collections.

Product Innovations and Updates

On-platform innovation focused on personalization and efficiency. Sellers gained tools like MyPage for store customization, dynamic pricing automation, and follower-based promotions. Buyers benefited from features like delivery-day filters, installment exclusives for Mercado Pago cardholders, and improved checkout flows.

New financial products launched include the MELI Dollar, a stablecoin for transacting and storing value, and LCI/LCA investment products in Brazil with low entry barriers (from BRL 100). These offerings aim to boost wallet stickiness and expand financial inclusion.

In logistics, a new shelving system reduced CapEx while increasing warehouse throughput. Grouped delivery optimization raised items per route, helping to offset inflation pressures.

Revenue by Region

$MELI generates 52% of its total revenue from Brazil, making it MercadoLibre’s largest market, with revenue growing +38% YoY in Q4.

The Argentina region contributes 22% of total revenue, growing +31% YoY. Revenue growth in Argentina significantly accelerated after a sharp decline in Q1 2024, when it fell -21% YoY.

Mexico also accounts for 22% of total revenue and has the highest growth rate at +43% YoY.

Revenue from Other Countries makes up 4% of total revenue, growing +40% YoY.

Revenue growth in Brazil, Mexico, and Other Countries is outpacing the company's overall revenue growth. Mexico stands out as a highly promising region for MercadoLibre.

Market Leader

Mercado Libre is the dominant e-commerce player in Latin America, with a strong presence across key markets, though its position varies by country and is increasingly challenged by regional and global competitors.

Brazil

In Brazil—the largest e-commerce market in Latin America—Mercado Livre leads with a 35% market share, attracting over 237 million monthly website visits and more than 17 million active app users. This puts it significantly ahead of Amazon, which holds 16.3% of the market and has 179.5 million visits and 8.1 million app users. Shopee, with 10% market share, has surpassed Amazon in monthly visits, signaling potential shifts in user engagement. Despite competition, Mercado Livre remains the clear leader in Brazil.

Mexico

Mexico represents Mercado Libre’s second-largest market with 30% market share, behind Amazon’s 40%. While Amazon leads in traffic with 121.7 million monthly visits, Mercado Libre is actively expanding, with a $3.4 billion investment planned for 2025—aimed at logistics infrastructure and hiring 10,000 new employees. Walmart and Coppel, with 15% and 10% shares respectively, add to the competitive landscape.

Argentina

In its home country, MercadoLibre holds a dominant 35% market share, maintaining leadership in a slower-growing e-commerce environment. Amazon follows at 20%, with local retailers like Fravega (15%), Garbarino (10%), and Musimundo (5%) making up the rest. Argentina's market is mature, with growth projected at just 0.5% CAGR through 2029, yet MercadoLibre's leadership remains solid.

Chile

Mercado Libre's presence in Chile is relatively limited at 5%, compared to Falabella’s 20.7% and Ripley’s 12%. Chile’s market is more traditional retail-driven, with local players leveraging strong physical footprints to maintain share. This makes it one of the few markets where Mercado Libre does not lead.

Colombia

In Colombia, Mercado Libre also holds a 5% market share, well behind Alkosto (20.7%) and Exito (20.6%). Amazon has a modest 8% share. While Colombia is forecasted to have the fastest e-commerce growth in Latin America (74% projected growth over four years), Mercado Libre is starting from a smaller base relative to competitors with stronger local operations.

Profitability

Over the past year, $MELI MercadoLibre has experienced changes in its margins:

· Gross margin decreased from 46.5% to 45.4%.

· Operating margin increased from 7.6% to 13.5%.

· Free cash flow (FCF) margin slightly rose from 39.6% to 43.1%.

· Net margin significantly improved from 3.7% to 10.5%.

Operating expenses

$MELI MercadoLibre's operating expenses have slightly decreased due to reductions in S&M, R&D, and G&A spending. Sales & Marketing (S&M) expenses declined from 20% to 19% over the past two years.
R&D expenses were reduced from 11% to 8% of revenue, but remain at a high level, allowing the company to continue investing in innovation. General & Administrative (G&A) expenses have decreased to 4%.

Balance Sheet

$MELI Balance Sheet: Total debt stands at $6,879 million, while MercadoLibre holds $3,695 million in cash on hand. This includes cash and cash equivalents, short-term investments, and customer funds held due to regulatory requirements and other restrictions.

The cash on hand exceeds total debt, so the balance sheet can be considered healthy.

Since the company offers various credit products, it's important to monitor repayment performance and credit quality.

​Dilution

$MELI Shareholder Dilution: MercadoLibre's stock-based compensation (SBC) expenses have declined to 1% of revenue, which is a low level for a high-growth company.

Shareholder dilution remains well-controlled, with the weighted-average number of basic common shares outstanding increasing by just 0.9% YoY.

Conclusion

MercadoLibre $MELI is a dominant player in both fintech and e-commerce across Latin America, strengthening its position through high R&D investment. The company remains highly innovative.

MercadoLibre trades at ervalued levels based on Forward EV/Sales and Forward P/E multiples, supported by a strong competitive advantage and excellent management. However, its operations in Latin America pose macroeconomic risks, especially due to high inflation in Argentina.

The percentage of Non-Performing Loans (NPL) over 90 days has significantly improved since Q4 2022, and the company continues to work on stabilizing credit quality.

The commerce segment is growing faster than overall revenue, up +44% YoY, with 6.3 million new Marketplace Buyers added—a record quarterly increase. GMV grew +8% YoY, with growth gradually slowing. The commerce take rate has increased over the past two years, now at a strong 24%. The number of successful items sold grew +27% YoY.

Fintech revenue growth accelerated to +29% YoY in Q4, up from Q3, though still slightly lagging total revenue growth. TPV grew +43% YoY, outpacing fintech revenue, and Q4 saw record growth in Fintech Active Users. The fintech take rate remained steady at 4.3%, the same as Q3. NIMAL rose to 28% in Q4, after dipping to 24% in Q3.

Both commerce and fintech segments are delivering strong revenue growth, with record additions in both Marketplace Buyers and Fintech Active Users during the quarter.

In October, November, and December 2024, I actively increased my position. $MELI now represents 10.1% of my portfolio and is currently my second-largest holding.