MercadoLibre Stock Price Forecast - MELI Stock Slides 6.7% to $2,179 as Growth Engines Clash with Rising Risks

NASDAQ:MELI Market Performance Under Pressure

MercadoLibre (NASDAQ:MELI) shares tumbled 6.7% to $2,179.00, erasing nearly $7 billion in market capitalization in a single session. The decline came after weeks of strong gains that had pushed the stock near its 52-week high of $2,645.22. Trading volume surged to 945,209 shares, almost triple the three-month average of 354,441, underscoring heightened investor anxiety. Despite the selloff, MELI retains a commanding $116.8 billion market cap, cementing its position as Latin America’s most valuable e-commerce and fintech platform.

Earnings Momentum and Revenue Expansion

MELI’s financial performance remains exceptional. Q2 2025 revenue reached $6.79 billion, up 33.8% year over year, even as foreign exchange dragged growth lower from an FX-neutral 53%. Net income printed $523 million, producing a trailing twelve-month EPS of $38.33. Analysts expect full-year 2025 EPS at $44.34, rising sharply to $66.81 in 2026, with consensus revenue estimates climbing from $28.2 billion this year to $35.7 billion next year. These forecasts imply earnings growth of nearly 50% in 2026, well above the S&P 500’s projected 14%.

Valuation Stretch and Market Comparisons

At current levels, MELI trades at a forward P/E of 35.5x and a PEG ratio of 1.14, a premium to global peers such as Amazon (NASDAQ:AMZN) at 33x forward earnings and Alibaba at sub-20x multiples. Historical multiples show MELI oscillating between 45x–60x forward P/E, with its current positioning only slightly below the upper bound. While expensive, analysts argue that MELI’s superior growth trajectory justifies the premium. Cantor Fitzgerald reaffirmed an Overweight rating with a $2,900 price target, while the Street’s most bullish call projects MELI at $3,500, representing nearly 60% upside from current levels.

E-Commerce Engine and Logistics Expansion

E-commerce remains MELI’s backbone, with gross merchandise volume up 40% YoY in Q1. Brazil drives nearly half of the business, contributing $6.6 billion in revenue in H1 2025, followed by Mexico at $2.7 billion and Argentina at $2.9 billion. MELI has committed massive resources to fulfillment, including dedicated aircraft and leased warehouses, enhancing delivery times and competing aggressively with Shopee (Sea Limited) and Amazon. Its take rate—fees on transactions—remains above 23%, reflecting both pricing power and ecosystem lock-in.

Fintech Flywheel and Credit Expansion

MercadoPago, MELI’s fintech arm, is rapidly evolving into a powerhouse. With 68 million monthly active users, it is the second-largest digital bank in Brazil and dominates Argentina and Mexico. The credit portfolio surged 91% YoY to $9 billion, driving net interest margins of 23%, though down from 31% a year earlier due to rising provisions. Credit quality remains under scrutiny as provisions for doubtful accounts jumped 57% to $690 million in Q2. Still, the segment represents a long-term driver as Latin America’s unbanked population continues to shrink.

Profitability, Margins, and Cash Flow Pressure

MELI posted a trailing profit margin of 8.5% and an operating margin of 12.1%, while return on equity soared to 43.8%. However, the company’s levered free cash flow turned negative at -$3.82 billion as reinvestments in logistics and credit consumed liquidity. Total debt ballooned to $9.01 billion, lifting the debt-to-equity ratio to 157.7%, though the company still holds nearly $4 billion in cash. With operating cash flow at $8.47 billion, MELI has the means to fund its expansion, but investors remain wary of rising leverage and thinner net interest margins in fintech.

Competitive Landscape and Regional Risks

Competition intensifies across both e-commerce and fintech. In Brazil, Shopee continues to grow MAUs, while Temu and Shein undercut MELI on pricing. In fintech, Nubank (NYSE:NU) leads Brazil with 123 million clients, outpacing MercadoPago’s 68 million, though MELI maintains a 4x lead in Argentina and strong momentum in Mexico. Macro risks also loom large. Argentina’s inflation and currency volatility erode reported USD earnings, while regulatory pressure in Brazil threatens credit expansion and fintech margins.

Analyst Sentiment and Price Outlook

Wall Street remains overwhelmingly bullish. Of 17 analysts, the majority rate MELI as a Buy or Strong Buy, with only a handful calling for Hold. The average price target of $2,897 signals 33% upside, while the high target of $3,500 suggests a new all-time high if execution holds. Quantitative screens remain cautious, labeling the stock a “Hold” given premium valuation, but long-term investors continue to highlight MELI as one of the most durable compounders in emerging markets.

That's TradingNEWS