3 reasons to buy MercadoLibre shares like there’s no tomorrow

Amazon it’s so big you’d think it dominates everywhere. However, this is not the case. Another 800-pound gorilla lives in Latin America: MercadoLibre (MELI 0.85%).

Over the past 10 years, MercadoLibre’s stock has grown to 20 bags, almost doubling Amazon’s return. Is it too late to join this Latin American leader’s bandwagon? Not at all. Here are three reasons why you should buy MercadoLibre stock like there’s no tomorrow.

1. Huge growth potential

Perhaps the most important reason to buy MercadoLibre stock like there’s no tomorrow is because it’s available Is Tomorrow. The company has enormous long-term growth potential.

This potential is already being realized. MercadoLibre’s net revenue increased 36% year-over-year to $4.3 billion in the first quarter of 2024. Profits increased 71% to $344 million. Total payment volume increased 35% year-over-year (86% on a constant currency basis) to $40.7 billion. Whichever way you look at it, MercadoLibre is delivering strong growth.

There should be further growth. As Richer Cathcart, investor relations officer at MercadoLibre, said on the company’s first-quarter earnings call: “In Latin America, e-commerce is far from mature and financial services are ripe for disruption.” He is right. According to Statista, the number of e-commerce users in Latin America is expected to grow by 57% by 2029. By the end of the decade, the regional fintech market could grow at a compound annual growth rate of 26%.

MercadoLibre also has opportunities to leverage its platform to expand into new areas and drive even greater growth. Advertising is a perfect example of this. The company’s advertising revenue grew 64% year-over-year in the first quarter, with improvement in all major markets.

2. Strong moats

The growth potential would not be impressive if MercadoLibre did not maintain its market leadership position. But it’s possible. The company has many strong moats.

MercadoLibre is currently celebrating its 25th year of operation. It has built a strong brand that is well known throughout Latin America. This helps the company continue to attract users to its e-commerce and fintech platforms and gives it an advantage in expanding into adjacent markets.

Few players in Latin America’s e-commerce and fintech markets can approach MercadoLibre’s scale. Its size allows the company to operate on a low-cost structure, which is another key competitive advantage.

But MercadoLibre’s biggest moat is the network effect of its platforms. The more customers shop on an e-commerce platform, the more sellers a company attracts and the more valuable its platform becomes. The situation is similar with MercadoLibre’s fintech offer.

This ecosystem is also “sticky” – the more customers use MercadoLibre, the less likely they are to switch to a competitor. MercadoLibre aims to further improve its platform with the MELI+ loyalty program.

3. International exposure

According to them, American investors invest on average nearly three-quarters of their portfolios in American stocks Karol Schwab. However, US stocks account for only 58% of global market capitalization. To increase diversification, many investors need to own more international stocks. MercadoLibre is a great alternative.

Latin America has faced key challenges in recent years. However, consulting firm McKinsey said in its 2023 report on the region that increasing globalization along with the emergence of Latin America’s young population could lead to stronger growth in the future. If so, MercadoLibre will likely be one of the biggest winners.

John Mackey, former CEO of Whole Foods Market, an Amazon subsidiary, is a board member of The Motley Fool. Keith Speights holds positions at Amazon and MercadoLibre. The Motley Fool covers and recommends Amazon and MercadoLibre. The Motley Fool has a disclosure policy.