Key Takeaways
- MercadoLibre (MELI) stock fell approximately 20% from October 5 to November 10, closing at $1,490.24 after reaching a new 52-week low on November 5.
- MercadoLibre’s third-quarter revenue and financial income rose 45% to $10.75 billion, but operating margin declined to 6.3% as shipping, fulfillment, and marketing investments pressured profitability.
- Sea Limited (SE) reported 41.3% revenue growth at Shopee in the third quarter, while Nu Holdings (NU) provides another perspective on Brazilian consumer credit conditions.
- MercadoLibre appears potentially undervalued following the selloff, although stronger margins and continued market share gains will be important to a sustained recovery.
What Happened?
MercadoLibre (MELI) stock declined approximately 20% from its October 5 closing price of $1,860.61 to $1,490.24 on November 10, after hitting a new 52-week low on November 5.
The decline reflects two concerns: political uncertainty in Brazil and weaker-than-expected profitability despite strong revenue growth.
Brazil’s October 25 presidential runoff delivered another term for Luiz Inácio Lula da Silva, who defeated Flávio Bolsonaro after trailing him in the first round.
MercadoLibre shares fell approximately 8% on October 26 as investors reassessed Brazil’s economic outlook, currency risks, and consumer spending conditions.
Brazil generated approximately $15.2 billion of MercadoLibre’s $28.9 billion in 2025 revenue, making it the company’s largest market.
However, the company’s third-quarter earnings report created a more immediate concern.
According to MercadoLibre’s third-quarter financial results, revenue and financial income increased 45% year over year to $10.75 billion, but reported earnings of $8.83 per share fell short of the $9.27 consensus estimate cited in the initial research brief.
Operating margin declined to 6.3% from approximately 9.8% a year earlier, reflecting higher shipping expenses, expanded fulfillment capacity, and increased marketing spending in Brazil.
In its third-quarter shareholder letter, management described the pressure on shipping margins as “the price of the habit we set out to build.”
The strategy is producing results. Items sold in Brazil increased more than 40% year over year for the fifth consecutive quarter, while MercadoLibre gained market share across its three largest markets.
Its lower free-shipping threshold also encouraged smaller purchases, initially putting pressure on shipping economics.
By September, Brazilian orders valued between R$19 and R$79 that qualified for free or slower delivery became variable contribution-positive for the first time, suggesting higher order volumes are beginning to improve shipping economics.
Competition remains significant.
Sea Limited’s third-quarter results showed Shopee revenue increased 41.3% to approximately $6.1 billion, highlighting the continued growth of a major e-commerce rival.
Shopee’s expansion increases the importance of MercadoLibre retaining customers and improving logistics efficiency in Brazil.
Meanwhile, Nu Holdings reported a 4.8% early-stage nonperforming loan ratio in the second quarter, providing another indicator of consumer credit conditions as Brazilian economic uncertainty increases.
MercadoLibre’s 15-to-90-day nonperforming loan ratio remained around 7.0% in the third quarter, broadly stable from the prior quarter and a year earlier.
For long-term investors, the central question is whether higher purchasing frequency and growing shipment volumes can eventually offset near-term margin pressure.
Is MercadoLibre Stock Undervalued or Overvalued?
MercadoLibre appears potentially undervalued following its recent decline, although its earnings recovery remains uncertain.
According to TIKR’s November 2 consensus snapshot, normalized earnings per share were projected to rise from $38.26 in 2026 to $55.89 in 2027, representing approximately 46% growth.
These forecasts preceded the latest earnings report, meaning analysts could revise expectations if shipping and fulfillment investments continue weighing on profitability.
MercadoLibre traded at approximately 41x forward earnings on November 2, compared with its five-year average of roughly 63x.
However, the five-year average includes unusually high valuations during 2021, making it an imperfect benchmark for assessing fair value today.
Over the next 12 months, MercadoLibre’s investment case will depend on improving fulfillment utilization, lower shipping costs per order, sustained e-commerce growth, and stable credit quality.
Higher shipment volumes could help spread fulfillment expenses across more orders, allowing revenue growth to translate into stronger operating margins.
If these improvements materialize, MercadoLibre could deliver meaningful earnings growth and justify a higher valuation.
Conversely, persistent margin pressure, intensifying competition from Shopee, or weaker Brazilian consumer spending could trigger additional earnings-estimate cuts.
Overall, the recent selloff appears potentially overdone given MercadoLibre’s strong revenue growth and continued market share gains. However, sustained upside will likely require evidence that its investments are translating into stronger profitability.
So what is MercadoLibre stock actually worth?
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Disclaimer:
Please note that the articles on TIKR are not intended to serve as investment or financial advice from TIKR or our content team, nor are they recommendations to buy or sell any stocks. We create our content based on TIKR Terminal’s investment data and analysts’ estimates. Our analysis might not include recent company news or important updates. TIKR has no position in any of the stocks mentioned. Thank you for reading, and happy investing!
