Executive Summary
Mercado Libre is a Latin American dominant e-commerce and fintech platform (similar to Amazon but for the LATAM population) that operates across 18 countries with primary revenue concentration in Brazil (55%), Mexico (22%), and Argentina (18%).
Mercado Libre has $28.9B in revenue in FY2025, up 39% year-over-year, with Q4 2025 accelerating further to 45% growth. This shows that this company is not one that is slowing down. But the market, however, has priced it as if it is.
The stock is currently sitting roughly 33% below its July 2025 all-time high of $2,645. This selloff was driven by concerns about the aggressive investment spending, which compressed EBITDA margins by about 500 basis points in 2025. The rapid credit portfolio expansion also raised questions about asset quality.
But when you look at the actual data, Non-Performing Loans(NPS) ratios are hitting a historic low of 4.4% even as the credit portfolio grew 90%. Items sold accelerated to a 43% YoY in Q4 precisely because of the free shipping investments. Fintech MAU also grew a 27% to 78M. All the provided evidence points to a business making investments that are working and proves that it is not one that is imprudently burning cash.
The commerce-fintech flywheel is strengthening, not weakening. Each new buyer drawn in by logistics improvements becomes a Mercado Pago user, which becomes a credit card holder, which drives more marketplace spend. This loop is measurable and accelerating.
The investments compressing margins today (free shipping, credit card expansion, fulfillment center buildout) are driving record market share gains and record NPS. When the investment cycle normalizes, EBITDA should inflect meaningfully above current 10% levels.
And last but not least, the valuation does not credit MELI’s fintech at anywhere close to a fair multiple. Mercado Pago ($12.6B revenue, 46% growth, 78M MAU) is being valued at a steep discount to LatAm fintech peers. This gap is unjustified given MELI’s credit quality data.
Why Now?
The opportunity exists because the stock price has declined while the company’s fundamentals have improved. Following the Q4 2025 earnings release on February 24, 2026, the data showed accelerating GMV growth, higher item sales growth, the highest customer satisfaction scores, improving credit quality, and continued fintech adoption. The business is getting stronger while the stock has gotten cheaper. That disconnect is where the investment opportunity lies.
What is MercadoLibre?
Before diving into numbers, one needs to understand the structural position MELI occupies in Latin America. LATAM has 3 characteristics that make it an exceptionally fertile ground for what MELI is building.
First, they have a large chronically underbanked population. Approximately 45% of LATAM adults lack access to formal banking. One clear example is the residents of Argentina. Since the 1970s, Argentines have lived through repeated cycles of hyperinflation, currency collapses, sovereign defaults, and government-imposed capital controls. Most recently, a dual exchange rate system created two parallel economies operating simultaneously: one at the official peso rate and one at the informal “blue dollar” rate, a black market exchange rate which frequently diverged from the official rate by more than 50%.
Annual inflation reached 292.2% in 2024. By 2025, President Milei decided to target inflation with a series of fiscal shock therapies that eliminated a national budget deficit running at approximately 5% of GDP and brought inflation down to 31.3%. While the inflation rate has come down significantly, the recent rebound in inflation from 31% to 33.5% reflects the lingering structural problems in the economy. The Argentine population could not trust its own currency nor access its own banking system efficiently.
MercadoLibre was able to develop a popular payment processor called Mercado Pago. By 2025, they had reached 78 million monthly active users across Latin America and grown its credit portfolio by 90% YoY. In August 2025, MercadoLibre launched its credit card in Argentina to target the structural market opportunity where over 60% of Argentine adults lack a credit card. For these consumers, Mercado Pago is often the first financial account they have ever held. This is not MELI taking share from JPMorgan or other incumbents, but creating its own market.
Second, e-commerce penetration in LATAM still lags the US by nearly a decade. They often do not have access to platforms like Walmart and Amazon. Physical retail in Brazil, Mexico, and Argentina remains large and structurally inefficient. Every percentage point of offline-to-online shift represents a large incremental opportunity for MELI, which controls the logistics infrastructure to handle it.
Third, the currency instability is driving a high digital dollar demand. Argentina saw 292.2% inflation in 2024. Brazil’s CDI rate makes dollar-denominated savings attractive. Mexico handles $60B+ in annual remittances. Stablecoin and dollar-denominated financial products have a natural and urgent demand, and MercadoLibre is the distribution channel.
| Segment | FY2025 Revenue | Key Products |
| Commerce (~56%) | $16.3B (+34% YoY) | Marketplace GMV, logistics (Envios), ads, 1P sales |
| Fintech (~44%) | $12.6B (+46% YoY) | Mercado Pago (payments, credit, MUSD stablecoin, AUM) |
| Total | $28.9B (+39% YOY) | 28 consecutive quarters of >30% revenue growth |
Mercado Libre has a two-engine business model. Marketplace commissions on $65B GMV, logistics services, high-margin advertising (growth of 67% YoY), and 1P product sales. Take rate has expanded to 25%, up to about 500bps. These data points shows the pricing power as the platform becomes indispensable.
Payment processing on $278B TPV, interest income from $12.5B credit portfolio, AUM management fees on about $19B, and MUSD stablecoin. Fintech is growing faster than commerce and carries structurally higher margins at scale.
The reason these two engines matter together is the flywheel they create. Commerce drives awareness and transaction volume into Mercado Pago. Mercado Pago or MerPago is the fintech and digital payments arm of MELI. Similar to how PayPal originally grew alongside eBay, MerPago does the same for Mercado Libre but offers much more. It provides digital wallets, peer-to-peer transfers, credit and debit cards, merchant payment processing, QR code payments, consumer and merchant lending, savings and investment products, and last but not least, buy now, pay later services
Mercado Pago converts those users into credit card holders and savers. Credit card holders spend more on the marketplace because of installment plans and cashback. More marketplace spending drives more logistics volume, which drives lower per-unit logistics costs, which allows MELI to invest in faster delivery, which attracts more buyers. Round and round, and the cycle never ends.
Fundamental Analysis
| Key Operating Metrics | Latest Value | YoY Growth |
| Total Revenue | $29.8B | +39% |
| Gross Merchandise Volume (GMV) | $65B (FY) / $19.9B Q4 | +26% FY / +37% Q4 |
| Total Payment Volume (TPV) | $278B | +41% |
| Fintech MAU (Mercado Pago) | 77.9M | +27% |
| Credit Portfolio | $12.5B | +90% YoY |
| Assets Under Management (AUM) | ~$19B | +78% |
| Advertising Revenue | ~$530M Q4 | +67% Q4 |
| Commerce Take Rate | 25.0% | +495bps |
| EBITDA Margin | 10.1% | 500bps (a cycle) |
| Items Sold | 2.4B FY / 751.8M Q4 | +43% Q4 |
| Unique Active Buyers | 120M annual / 80M+ Q4 | +24% Q4 |
| NPL (Non-Performing Loan) Ratio (15-90 day) | 4.4% | Historic low |
From the table above, one can see that revenue growth accelerated in 2025 despite 2024’s high base. This is quite unusual for a company of this size. The sequential acceleration from 39% full year to 45% in Q4 is the most important datapoint. This shows that things are getting better and not worse.
The Credit Portfolio
The single biggest concern may be the credit portfolio. The portfolio grew 90% YoY to $12.5 billion. Rapid credit growth at a fintech often precedes a credit quality blow-up. However, one key fact one needs to keep in mind is that while the portfolio doubled, NPL hit a historic low.
The 15-to-90-day non-performing loan ratio fell to 4.4% in FY2025. This is a historic low for Mercado Pago, even as the portfolio grew 90% YoY. This further shows that credit quality is improving, not deteriorating. This is the opposite of the bear case.
The credit card portfolio grew 118% YoY in H1 2025 to $4B+. Credit cards are structurally lower risk than unsecured consumer loans because they are revolving facilities backed by spending behavior data. MELI has transactional data on its borrowers such as purchase history, repayment patterns, TPV trends that traditional banks simply do not have access to. The AI-driven credit scoring models being built on this proprietary data are working.
It is not that ‘fintech lending blow-up’ but “what Amazon did with AWS but for financial services in LatAm” is blowing up. MELI is using its data advantage to underwrite credit better than legacy banks, and the improving NPL proves it is working.
Revenue Model Built
The following equations show the decomposition of the reported revenue from observable operating drivers and sanity-check whether management numbers hold together.
Commerce Revenue = GMV x Take Rate
FY2025: $65B GMV x 25.0% take rate = ~$16.3B (this matches reported Commerce revenue of $16.3B)
Fintech Revenue = Acquiring TPV x Yield + Credit Interest Income + AUM Fees
FY2025: $188B acquiring TPV x ~2.5% yield + credit portfolio income + AUM fees = ~$12.6B (this matches reported Mercado Pago revenue)
Total Revenue = Commerce Revenue + Fintech Revenue = $16.3B + $12.6B = $28.9B
Matches reported FY2025 figures. YoY growth: ($28.9B / $20.8B) – 1 = 38.9% (reported: 39%)
EBITDA = Revenue x EBITDA Margin = $28.9B x 10.1% = ~$2.9B
Note: Margin compressed ~500bps in 2025 from deliberate logistics/credit card investments. Management guides normalization as subsidies stabilize.
EBITDA was roughly flat YoY in dollar terms despite 39% revenue growth. All the incremental revenue was reinvested. That is a choice, not a failure. The question is whether those investments generate returns. And they do.
(~: approximates for better calculation)
Devil’s Advocate & The Counterpoints
The most substantive bear argument against MELI right now is not about the business model but about its capital allocation. Investors are worried that MELI is spending aggressively on free shipping subsidies and credit card expansion. These expenditures compress near-term margins, and there is no guarantee that those investments generate adequate returns.Free shipping subsidies are burning cash without guaranteed customer retention.
Credit card expansion is expensive, with its card issuance, rewards, and credit risk provisioning. Growing the card book 118% YoY looks a bit reckless. Investors are worried about what happens to margins if revenue slows.
However, this concern is easily addressed. The data answers this directly. Q4 GMV grew 37% and items sold grew 43% after lowering the threshold. Shipping investments drove demonstrable volume acceleration. Brazil GMV had an increase of 35% FX-neutral.
The credit card portfolio grew 118% and the NPL ratio hit an all-time low of 4.4%. This shows the precision underwriting at scale using proprietary transaction data.
MELI has done this before. Margin dipped during the 2020-2022 logistics buildout, then recovered to 14% in 2024. The pattern that worked is to invest aggressively, gain share, and harvest the margins. We are currently in the invest phase.
Management has been clear that 2025 was the peak investment intensity. As free shipping costs normalize and the credit card portfolio matures, the structural EBITDA margin should recover toward about 16%. At 28.9B of revenue, that implies EBITDA of about 4.6B, a meaningful step-up from the 2.9B in 2025.
The Underappreciated Driver
Most investors thinking about MELI focus on commerce GMV and credit growth. The advertising business often gets overlooked, but it deserves serious attention.
Advertising revenue grew 67% YoY in Q4 2025. At roughly $530M per quarter, advertising is still a small fraction of total revenue. But at an e-commerce scale, advertising is a structurally high-margin business. Amazon’s advertising segment runs at operating margins that are materially above the company’s average. MELI is building the same dynamic in Latin America. The first-party transaction data lets it offer highly targeted ad placements to the brands and sellers on its platform.
The recent integration with Google Ad Manager expands MELI’s advertising inventory beyond its own platform. Off-platform ad inventory that serves MELI’s first-party data to external publishers is the next leg of this story. At 67% growth off a meaningful base, advertising is on track to become a 2B or more annual revenue stream within 2 to 3 years. The incremental margins on those dollars are substantially higher than the company average.
Competitive Analysis
MELI does not have a perfect comparable. It is simultaneously an e-commerce marketplace with competitors like Amazon or Sea Limited and a digital bank with competitors like Nu Holdings and PayPal. The blended business commands a blended multiple and is part of why the stock often appears optically expensive or cheap. And this is because it depends on which lens you use. The right approach is to value each segment separately.
| Company | Business | P/S (NTM) | P/E (NTM) | EV/EBITA |
| MELI | E-comm + Fintech | 3.5x | 41.4x | 35x |
| Nu Holdings | LatAm fintech | 6.84x | 24.35x | 33.25x |
| Sea Limited | SEA e-comm | 2.5x | 30x | 15x |
| Amazon | US e-comm | 3.2x | 33x | 17.24x |
| PayPal | Payments | 1.57x | 9.37x | 6.56x |
Nu Holdings
Nu Holdings is the most direct fintech competitor in LATAM and the company that is most frequently compared to Mercado Pago. Nu closed FY2025 with 131 million customers globally and added 17 million customers during the year. Its Q4 revenue reached 4.9 billion and net income of 895 million at a ROE of 33%.
But Nu is a pure-play digital bank. It wins by going deeper with financial products for its existing customer base. On the other hand, MELI is a commerce-first platform that converts buyers into financial users, not the other way around. These are fundamentally different acquisition channels. Nu acquires customers by offering a better bank account or banking service. MELI acquires customers because people want to buy something on Mercado Libre, and Mercado Pago is already there. Few would go through the long process of getting a bank account to buy something online. This means MELI’s fintech customer acquisition cost is effectively subsidized by its commerce engine in a way that Nu can never be.
Sea Limited
Sea Limited is the most structurally similar business to MELI globally. It is a dominant regional e-commerce platform with an embedded fintech arm building a credit business on top of its transaction data. But it operates mainly in Southeast Asia where TikTok Shop is aggressively competing for Shopee’s market share. MELI operates in LATAM, where no comparable competitor exists at scale.
Amazon
Amazon is not a direct competitor to MELI today, but it is the most useful benchmark for understanding where MELI is going. Amazon built the same commerce-to-fintech flywheel in the US and is valued at roughly 17x EBITDA. MELI is building the same flywheel in a market that is earlier in its digitization curve and growing much faster. So, why can’t MELI beat Amazon? My answer is, it will when given the time. Mercado Libre is still growing while penetrating an e-commerce runway and will be able to be a bigger incumbent compared to Amazon in the LATAM and even the border territory.
PayPal
PayPal is frequently listed as a MELI comparable because both process digital payments. PayPal is a mature payments processor, but it has failed to build the commerce flywheel MELI has built. Its user growth is flat, its take rate is under pressure from competition with Stripe and Apple Pay, and its credit products are subscale. MELI and PayPal share a payments layer but nothing else. Thus, PayPal cannot be considered a direct competitor.
Analysis Conclusion
The competitive analysis above reveals why a single-multiple comps approach fundamentally fails for MELI. Applying any one of many multiples to MELI’s mixed revenue produces a number that is either too conservative or too generous depending on which part of the business dominates the analysis. The only approach is to disaggregate MELI into its three distinct businesses: Commerce, Fintech, and Advertising, and value each against its most appropriate peer, and sum the parts after. The competitors listed above provide the anchors for each of the segments. Commerce is anchored to companies like Amazon and Sea Limited. Fintech is anchored between Nu Holdings on the high end and PayPal on the low end. Advertising has no direct comp in this peer set, but can follow Amazon’s structure, which is the most similar considering all factors currently. What follows is the valuation built from those anchors.
Valuation
Artemis: Mercado Libre’s Income Statement
Revenue compounded from $4.0B in 2020 to $28.9B in FY2025. This is a 7x increase in five years and proves the business model works at scale. The operating margin went from -6.7% in 2019 to a peak of 14.6% in 2023,12.7% in 2024, and 11.1% in 2025. This shows MELI’s investment cycle of compressing margins during its buildout, then expanding them. The current compression from 14.6% back to 11.1% over two years is the same pattern. The provision for doubtful accounts grew from 133M to 3.1B in FY2025. This is a clear example of their credit portfolio scaling and not the credit quality deterioration that investors are expecting. Since NPL ratios are simultaneously at historic lows of 4.4%, every dollar is actually performing better and not worse.
Thus, a bullish case built for Meli is based on its precedent cycle that the company has already demonstrated in past years. There is a future earnings tailwind for Meli as the credit portfolio matures and loss rates stabilize. Their growth will eventually slow down, but the interest income opportunity continues to compound and expand their net income and revenue growth.
From the analysis, one can see that Meli is currently a business in the middle of its second deliberate investment cycle. And while the first one has already proven to work, we can undoubtedly say that the second has no reason to fail.
Risk
Foreign Exchange Risk
Foreign exchange risk is the most immediate risk for dollar-denominated investors. MELI reports in USD but generates the majority of its revenue in Brazilian reais (BRL), Mexican pesos (MXN), and Argentine pesos (ARS). A meaningful depreciation in any of these currencies reduces USD-reported revenue and earnings even if the underlying business performs well in local currency terms. Brazil and Mexico together represent approximately 77% of revenue. This means BRL and MXN movements dominate the FX impact. If another inflation like the one that happened in Argentina occurs, then it would significantly shock MELI’s pricing.
Credit Quality Deterioration
The 90% growth in the credit portfolio to 12.5B is the number that matters most if the macro environment deteriorates. The bull case rests in part on the NPL ratio staying near 4.4% as the portfolio scales. If a macro shock such as recession in Brazil, BRL depreciation compressing borrower incomes, or an Argentine crisis occursm, it can cause NPL to spike. This would compress EBITDA.
Regulatory and Antitrust Risk
Mercado Pago has filed an antitrust action against 36 Argentine banks to protect its payment network. This shows an aggressive competitive posture but also invites regulatory scrutiny in the opposite direction. As Mercado Pago pursues full banking licenses across its key markets, its relationship with BCRA in Argentina, Banco Central do Brasil, and Banxico in Mexico becomes a key risk vector. An adverse regulatory ruling in any of the three core markets could impair its competitive advantage.
Conclusion
The bear case for MELI is visible. Currently, the stock sits 33% below its 52-week high of $2,645 and at a P/E of 41.4x. the stock looks expensive. With a business whose Q4 revenue just accelerated to 45% growth and with management guiding margins back toward 16%, one can clearly see that MELI is mispriced.
According to the history of the company and holding the management to what they already guided with (crediting Commerce at 3.5x, Fintech at 5.0x, and Advertising at 7.0x forward revenue) this can imply around an $3,922 price per share. That is 140% growth from the current price of $1,632. Twenty-three analysts covering the stock hold a unanimous Buy rating with a consensus price target of $2,439 and a high estimate of $3,500.
The advertising segment is where the real asymmetry lives. As this segment becomes more visible in the financials, it will force investors to do a re-rating of the entire company. Currently that re-rating is not yet in any price target on the Street but investors can predict the re-rating right now and see that it is a clear bull run.
All in all, the mispricing is not subtle. Any investor who looks at the company as a whole with its past history in mind will see a heavy bull run and the target price to be near 4000.
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