Meet the Latin American e-commerce platform that surpassed Amazon this year – NBC New York

• MercadoLibre, an Argentine e-commerce and payments company, grew 34% year over year, while Amazon grew around 27%.
• The company was founded in 1999 by current CEO Marcos Gaplerin and dominates the online sales market in Brazil, Argentina, Mexico, Chile and other Latin American countries.
• “If you look at e-commerce penetration in Latin America, it’s still quite low compared to the U.S., Europe, Asia,” says Galperin. “It’s a huge opportunity.”

One of the world’s largest e-commerce companies is gaining attention on Wall Street as investors look for technology opportunities beyond the Magnificent Seven.

MercadoLibre, an Argentine e-commerce and payments platform registered in Delaware and actively traded on the Nasdaq, is up 34% in 2024, compared with about 27% growth for Amazon and 20% growth for the S&P 500. The company was founded 25 years ago by CEO Marcos Gaplerin at the height of the dot-com boom. It now dominates online sales in Brazil, Argentina, Mexico and Chile and accounts for about half of online sales in South America, according to eMarketer. It also operates a digital payments platform called Mercado Pago.

About 90% of Wall Street analysts covering the stock rate it a “buy,” with an average price target of $2,268 — about 8% upside from where it traded this week, according to FactSet. There are no sell ratings.

Altimeter Capital’s Brad Gerstner is one such bull. He highlighted MercadoLibre’s rising profit margins and AI potential as reasons he’s “excited” about the stock.

“You look at companies like MercadoLibre… a lot of companies that people kind of forgot about when (investors) got into the Magnificent Seven — I think there’s going to be a lot of internet companies that are going to benefit from AI,” Gerstner told CNBC’s Scott Wapner at the Goldman Sachs Communicopia conference this month. “It’s not just margin expansion, but a reacceleration at the top, where they can acquire customers, improve products in a way that makes it easier for customers to buy and removes friction from the system.”

Silicon Valley to Buenos Aires

Galperin came up with the idea for MercadoLibre while he was a student at Stanford Graduate School of Business in Palo Alto, California. He began seeking seed funding at a time when few investors were investing capital outside of California.

“There was no venture capital for Latin America. There was actually very little venture capital for anything outside of Silicon Valley. Even if you were an entrepreneur based in New York, all the investors were on Sand Hill Road,” Galperin told CNBC, referring to Wall Street on the West Coast. “I don’t think they were really keen to explore other parts of the world.”

That investor sentiment has changed. Last year, Latin America’s venture-backed firms raised $3.3 billion across nearly 1,000 deals, according to PitchBook. At its peak in 2021, the region brought in $16.3 billion.

But in the late 1990s, Galperin approached a private equity investor who happened to be teaching at Stanford University and presented Latin America’s lack of infrastructure and competition as an opportunity.

“There was no infrastructure in Latin America. You couldn’t make payments online. There was no efficient logistics for peer-to-peer commerce, we had to build it all ourselves,” Galperin said. “That made it difficult at the beginning — but for us today it’s great.”

While MercadoLibre is sometimes called the “Amazon of South America,” Galperin built the company at a time when eBay dominated e-commerce. Amazon, at the time, was more of an online bookstore. In fact, MercadoLibre partnered with eBay, which bought 20% of the company in 2001 and sold the stake in 2016.

“We learned a lot from that relationship, and then we eventually started moving away from auctions,” Galperin said. “I think we’re much closer to what Amazon is today.”

Amazon is starting to see opportunities in South America, too. The dominant North American e-commerce platform has expanded into Mexico. “We’ve been competing from the beginning—that’s something that will continue for many years,” Galperin said.

Competitive winds favorable

He pointed to favorable tailwinds that could help MercadoLibre survive the competition. E-commerce and online payments are growing steadily, and Latin America has a young, mobile-savvy population of more than 600 million. MercadoLibre grew revenue by 42% in the second quarter and by 112% on a currency-neutral basis. Its operating profit margin rose to 14.3%.

“If you look at e-commerce penetration in Latin America, it’s still quite low compared to the U.S., Europe, Asia,” Galperin told CNBC. “About half of the population is unbanked or has limited access to banking. This is a huge opportunity for us to distribute financial products to all those people who have been historically excluded.”