Key Takeaways:
- Latin American Dominance: MercadoLibre delivered 39% revenue growth in Q3, marking its 27th consecutive quarter of growth above 30%.
- Price Projection: Based on current momentum, the stock could reach $3,523 by December 2027.
- Potential Gains: This target implies a total return of 71% from the current price of $2,058.
- Annual Return: Investors could see roughly 32% annual growth over the next 1.9 years.
Now Live: Discover how much upside your favorite stocks could have using TIKR’s new Valuation Model (It’s free)>>>
MercadoLibre (MELI) just delivered another blockbuster quarter, with revenues climbing 39% year over year. But the numbers don’t capture the full transformation happening across Latin America.
The company is accelerating its dominance in both e-commerce and fintech as it drives the region’s shift from offline to online retail.
- The company added 7.8 million new buyers in Q3, bringing the total number of unique buyers to 75 million.
- Items sold in Brazil surged 42%, up from 26% growth last quarter.
- This acceleration followed MercadoLibre’s lowering of its free shipping threshold, sparking massive increases in both demand and supply on its platform.
Meanwhile, Mercado Pago hit record levels of user engagement. Monthly active users grew at an accelerating pace, while Net Promoter Scores reached all-time highs in Brazil. The credit card business continues maturing, with nearly 50% of Brazil’s card volume now profitable.
Despite operating in volatile emerging markets, MELI stock trades at $2,058, offering substantial upside for investors who understand the company’s network effects and scale advantages across Latin America’s massive underserved markets.
See analysts’ full growth forecasts and estimates for MELI stock (It’s free) >>>
What the Model Says for MercadoLibre Stock
We analyzed MercadoLibre through the lens of CFO Martin de los Santos’s vision, focusing on the “immense growth opportunities” in e-commerce and fintech across Latin America.
The recent reduction in the free shipping threshold in Brazil has already delivered dramatic results. GMV accelerated, conversion rates hit records, and both buyer retention and frequency improved sharply. Sellers benefited too, with listings in the BRL 19-79 price range increasing rapidly.
Using a forecast of 29.6% annual revenue growth and 12.7% operating margins, our model projects the stock will rise to $3,523 within 1.9 years. This assumes a 32x Price-to-Earnings multiple, representing compression from MercadoLibre’s current P/E of 41.5x.
As the company continues heavy investments in logistics, credit cards, and first-party retail, some multiple compression is reasonable. The real value lies in sustained ecosystem growth and the massive runway ahead for converting Latin America’s predominantly offline retail market.
Our Valuation Assumptions
Estimate a company’s fair value instantly (Free with TIKR) >>>
Our Valuation Assumptions
TIKR’s Valuation Model lets you plug in your own assumptions for a company’s revenue growth, operating margins, and P/E multiple, and calculates the stock’s expected returns.
Here’s what we used for MELI stock:
1. Revenue Growth: 29.6%
MercadoLibre’s growth engine benefits from multiple powerful tailwinds converging simultaneously.
Brazil E-commerce Acceleration: The lower free shipping threshold drove growth in items sold from 26% to 42% quarter-over-quarter. Shipping costs decreased 8% despite extraordinary volume increases. New buyers reached 7.8 million for the quarter, with record retention and conversion rates.
Fintech Momentum: Mercado Pago achieved stellar quarterly results with accelerating monthly active user growth. Assets under management and the credit portfolio both expanded rapidly. Principality improved by 11 percentage points in Brazil as more users made Mercado Pago their primary financial account.
Credit Card Maturation: Nearly 50% of credit card volume in Brazil is now profitable, with cohorts older than two years generating positive returns. The company launched cards in Argentina this quarter, opening another massive market opportunity.
Regional Expansion: Mexico delivered strong GMV acceleration with falling fulfillment costs. Chile’s GMV growth accelerated for the third consecutive quarter, while Colombia’s growth jumped by more than 10 percentage points quarter over quarter.
2. Operating margins: 12.7%
MercadoLibre operates with impressive margins given its aggressive growth investments.
Current Performance: Operating income reached $724 million in Q3, growing 30% year-over-year. This demonstrates the company’s ability to balance growth investments with profitability and leverage its increasing scale.
Strategic Investments: MercadoLibre continues investing heavily in free shipping, logistics infrastructure, first-party retail, and credit cards. These investments pressure margins in the short term but drive strong top-line growth. Fulfillment center capacity increased 41% year-over-year.
Operating Leverage: Despite heavy investments, the company achieved strong dilution in G&A and product development expenses. Revenue growth at 39% significantly outpaces expense growth, creating natural operating leverage as the business scales.
3. Exit P/E Multiple: 32x
The market currently values MercadoLibre at 41.5x earnings. We chose 32x for our exit multiple to stay conservative.
Below Historical Average: MercadoLibre’s P/E has averaged 44.6x over the past year and 165.9x over five years. The current multiple reflects strong investor enthusiasm, but some compression is likely as the company matures and margins normalize.
Build your own Valuation Model to value any stock (It’s free!) >>>
What Happens If Things Go Better or Worse?
Latin American e-commerce faces challenges from currency volatility, macro instability, and competitive pressure. Here’s how MercadoLibre stock might perform under different scenarios through December 2027:
- Low Case: If revenue growth slows to 20.5% and net income margins compress to 9.3%, the stock still offers a 22.3% annual return.
- Mid Case: With 22.8% growth and 10.0% net margins, we expect an annual return of 31.9%.
- High Case: If e-commerce adoption accelerates and MercadoLibre maintains 10.5% margins while growing at 25.1%, returns could hit 41.0% annually.
See what analysts think about MELI stock right now (Free with TIKR) >>>
The range reflects different outcomes for Latin America’s digital transformation and MercadoLibre’s competitive positioning.
In the low case, increased competition or macro challenges slow growth momentum.
In the high case, MercadoLibre’s network effects strengthen as it captures an outsized share of the offline-to-online shift while credit card operations scale profitably across all major markets.
How Much Upside Does MercadoLibre Stock Have From Here?
With TIKR’s new Valuation Model tool, you can estimate a stock’s potential share price in under a minute.
All it takes is three simple inputs:
- Revenue Growth
- Operating Margins
- Exit P/E Multiple
If you’re not sure what to enter, TIKR automatically fills in each input using analysts’ consensus estimates, giving you a quick, reliable starting point.
From there, TIKR calculates the potential share price and total returns under Bull, Base, and Bear scenarios so you can quickly see whether a stock looks undervalued or overvalued.
See a stock’s true value in under 60 seconds (Free with TIKR) >>>
Looking for New Opportunities?
- See what stocks billionaire investors are buying so you can follow the smart money.
- Analyze stocks in as little as 5 minutes with TIKR’s all-in-one, easy-to-use platform.
- The more rocks you overturn… the more opportunities you’ll uncover. Search 100K+ global stocks, global top investor holdings, and more with TIKR.
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 stocks mentioned. Thank you for reading, and happy investing!
