3 Reasons to Buy MercadoLibre Shares Like There’s No Tomorrow

Any investor currently looking for new growth stocks has probably not considered these MercadoLibre (NASDAQ: MELI). In fact, there’s a good chance you’ve never heard of this company.

Don’t let your lack of familiarity stop you from jumping into this interesting stock pick. It has a ton of growth potential – it’s just taking advantage of its opportunity outside of your immediate circle of awareness. See, MercadoLibre’s market is Latin America. It’s often called Amazon Latin America, and rightly so, for many reasons.

Reasons to buy MercadoLibre shares

While the comparison to Amazon is fair, it is also incomplete. In addition to running an online marketplace open to third-party sellers, the company also facilitates online auctions similar to eBay‘s allows brands to manage their own online store, like Online shopand allows you to make payments online and offline in the same way as Card payment. Its current primary markets are Brazil, Argentina, and Mexico, although it operates in various forms in several others. Of course, the company is always looking for ways to expand its reach.

Whatever it does, wherever it does it, it works. The company’s first-quarter revenue grew 30% year over year, driven by a currency-neutral 86% increase in total payments processed and a comparable 71% increase in volume sold. This growth also extends long-standing trends.

But this continued progress isn’t the whole point of why you might want to own shares in the company sooner rather than later. It’s simply the result of larger and more important bullish factors at work here. Three stand out above the rest.

1. Latin America’s Broadband Industry Continues to Grow

In many ways, Latin America is where North America was 20 years ago. That is, while the internet isn’t exactly new, broadband is only just becoming widespread. Although it has increased somewhat in the past year, Standard & Poor’s reports that still fewer than 60% of Latin American homes have access to high-speed wired internet. The remaining 40% or more don’t yet have a fixed broadband subscription, but many of those residents eventually will.

Despite this, consumers in the region are more likely to adopt their mobile devices as their primary broadband connection to the rest of the world. To that end, market research firm GSMA suggests that only 65% ​​of the continent’s population currently uses smartphone-based mobile internet, although penetration is expected to reach 72% by 2030.

The story continues

2. The e-commerce market in the region is booming

This expanding connectivity, of course, sets the stage for more online shopping, as well as the use of smartphones as digital wallets. The industry is already seeing this. Americas Market Intelligence predicts that Latin America’s e-commerce industry will grow 24% this year, then 21% next year, and another 21% the year after that.

Incidentally, Brazil, Mexico, Colombia and Argentina are currently the largest e-commerce markets in the region, which further strengthens MercadoLibre’s position.

3. MercadoLibre is already here (if not this) market leader

Finally, MercadoLibre stock is worth buying because the company is already a leading brand in two of its main business lines: e-commerce and payments.

It’s an idea that requires some discussion. Namely, know that unlike Amazon in North America, Latin American markets are very fragmented and have a large number of competing names.

By comparison, while DBS Bank estimates that MercadoLibre handles 68% of Argentine e-commerce, it handles only 14% of Mexican e-commerce. Meanwhile, while Brazil is its largest market, MercadoLibre is not the leading fintech company in the country. It is second, although it is the largest payments player in Mexico, even though that is not the main market for MercadoLibre’s e-commerce business. The point is that MercadoLibre is not a dominant name in the sense that most American investors understand the idea.

However, Entire MercadoLibre Is a powerful payment and e-commerce company. It is classified as the largest e-commerce company in Latin America, even with a modest overall share, and with around 50 million users of its banking and payment app, MercadoLibre ranks alongside the largest names in the region dedicated to online banking, such as Now AND PagBankwhich boast 100 million and 30 million customers respectively.

Already an established, well-known brand, MercadoLibre is poised to capture at least a significant share of the future growth in online banking and payments users in Latin America.

Not for everyone

Impressed? You should be. This company thrives on doing things right, in the right place, at the right time.

Still, MercadoLibre may not suit every wallet.

Why? Because MercadoLibre is based and operates overseas, it’s hard to find up-to-date information about the company. There’s also a huge amount of currency volatility in and around key markets, which can make it difficult to predict the company’s quarterly results. Not to mention the political turmoil that seems to be rocking select pockets of Latin America right now. All of this means you’ll want to keep a close eye on MercadoLibre’s story and its stock.

But if you don’t mind closely monitoring your portfolio holdings in exchange for above-average growth prospects, this is an often-overlooked stock worth diving into. Just don’t delay if that’s your plan. Stocks are a bit sluggish right now, but that could change with the slightest hint of renewed economic strength and stability.

Is it worth investing $1000 in MercadoLibre right now?

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John Mackey, former CEO of Whole Foods Market, an Amazon subsidiary, is a board member of The Motley Fool. James Brumley has no holdings in any of the stocks mentioned. The Motley Fool owns shares of and recommends Amazon, MercadoLibre, PagSeguro Digital, PayPal, and Shopify. The Motley Fool recommends Nu Holdings and eBay and recommends the following options: short July 2024 $52.50 call options on eBay and short September 2024 $62.50 call options on PayPal. The Motley Fool has a disclosure policy.

3 Reasons to Buy MercadoLibre Stock Like There’s No Tomorrow was originally published by The Motley Fool