MercadoLibre MELI, Latin America's leading e-commerce and fintech company, delivered impressive fourth-quarter 2024 results. The company reported earnings of $12.61 per share, surpassing the Zacks Consensus Estimate by 73.69% and showing a remarkable 288% year-over-year increase. Revenues reached $6.05 billion, up 24% year over year (75% on an FX-neutral basis), beating the consensus mark by 3.7%.

MELI Strong Ecosystem Growth Continues

MercadoLibre achieved several significant milestones in 2024, passing 100 million unique buyers on its marketplace and reaching 60 million fintech monthly active users for the first time in its history. The company's total payment volume increased to $58.9 billion, up 33% year over year, while gross merchandise volume reached $14.5 billion, which grew 8% year over year (56% on an FX-neutral basis).

The company's fintech division showed particularly strong results. The credit portfolio expanded 74% year over year to $6.6 billion, with the credit card segment growing at an impressive 118% compared to the overall portfolio growth of 57%. Assets under management grew 129% to $10.6 billion, driven largely by the success of the company's yielding account.

MELI Balancing Growth Investments and Profitability

MercadoLibre has been strategically investing in logistics infrastructure and its credit card business, which have been crucial to its growth but have occasionally pressured margins. The company set a new quarterly record of $820 million for income from operations in fourth-quarter 2024, with an operating margin of 13.5%, reflecting an improvement of 60 basis points (bps) from the prior year on a comparable basis.

Net income reached $639 million, with significant growth of 67% year over year. For the year as a whole, MercadoLibre generated $1.3 billion of adjusted free cash flow after investing $860 million in capital expenditures and nearly $3 billion in fintech funding.

The Zacks Consensus Estimate for 2025 is pegged at $25.4 billion, indicating year-over-year growth of 22.25%. The consensus mark for 2025 earnings is pegged at $45.33 per share, suggesting a year-over-year rise of 20.27%. Earnings estimates have moved north by 3.1% over the past 30 days.

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Challenges and Competitive Pressures for MELI

Despite its strong performance, MercadoLibre faces intensifying competition in Latin America. Amazon AMZN and Walmart WMT are expanding their presence in the region, particularly in Mexico and Brazil. This competition could potentially limit MercadoLibre's market share growth and put pressure on margins in the future.

Additionally, macroeconomic uncertainties in key markets remain a concern. While Argentina showed encouraging trends with 18% year-over-year growth in items sold during the fourth quarter, the country's volatile economic history urges caution. The company has taken measures to reduce risk in Brazil amid rising interest rates, including limiting micro card issuance and tightening payback periods for new credit issuances.

The stock has returned 38.1% over the past year, underperforming the Zacks Retail-Wholesale sector’s growth of 23.8%. The stock price rally, combined with ongoing margin pressure from strategic investments, could create better buying opportunities for the rest of 2025.

1-Year MELI Stock Price Performance

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MELI Stock Valuation Concerns

MercadoLibre currently trades at a P/E multiple of 47.24X, representing a significant premium compared to the Zacks Internet - Commerce industry average of 24.08X. This premium valuation reflects the company's market leadership and strong growth trajectory but raises questions about sustainability, especially in the face of increasing competition and potential margin pressures from ongoing investments.

MELI’s P/E Ratio Depicts Stretched Valuation

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Investment Outlook: Hold MELI Stock or Wait?

While MercadoLibre demonstrates impressive operational execution and has substantial growth runways in both e-commerce and fintech, the premium valuation suggests investors might benefit from patience. The company's strategic investments in logistics and credit services position it well for long-term growth, but these investments may continue to create margin volatility in the near term.

For existing shareholders, holding the stock appears justified given the company's strong market position and growth trajectory. However, prospective investors might consider waiting for a more attractive entry point in 2025, potentially during broader market pullbacks or company-specific challenges that might temporarily impact the stock price.

MercadoLibre's disciplined approach to growth investments, robust ecosystem development, and impressive financial results make it a compelling long-term e-commerce and fintech play in Latin America, but timing remains crucial given the current valuation premium. MELI stock currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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This article originally published on Zacks Investment Research (zacks.com).

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