Arrakis Global
Global Thematic Fund Manager
MercadoLibre is a broken stock whose shareholder base is shifting from growth to quality and finally to value, a painful shift that marks the end of the story. E-commerce stocks have been going through this for some time. MercadoLibre is breaking its long-term price uptrend, a signal longs have ignored, so arguments about fundamentals don't matter; better to look elsewhere. x.comÂ
Political uncertainty and Amazon competition have held MercadoLibre's stock back despite a humming business. The company is great and the stock deserves to turn, but at roughly 45 times earnings and only about 12% gained over five years, it has remained a difficult stock to own. x.com x.com x.com x.comÂ
MercadoLibre's collapsing margins and earnings make its 45-times-earnings valuation look like a value trap. It faces intense competition, and less of its revenue reaches the bottom line; falling earnings make the stock more expensive even as its price falls. Nu Holdings trades at 17 times earnings and Inter & Co at 7 times, with both growing revenue and earnings robustly. Selling MercadoLibre to build positions in companies with better fundamentals is under consideration. x.com x.com x.com x.comÂ
MercadoLibre's commerce and fintech revenue growth underpins the view that its shares are undervalued at current prices. The attached chart shows quarterly commerce services revenue reaching $4.3 billion and fintech revenue $4.4 billion in June 2026, up from $769 million and $467 million in March 2021. x.comÂ
South American political unpredictability keeps investors from rewarding MercadoLibre's excellent fundamentals. Today's selloff illustrates that risk, despite the strength of the business. x.com x.comÂ
MercadoLibre ranks C tier among large-cap tech after Q1 earnings because margin contraction and heavy investment are pressuring its free cash flow outlook. Its top line keeps growing, but there are no AI tailwinds to offset the drag from logistics and credit spending into 2027. The ranking weights forward visibility and AI exposure, placing MercadoLibre alongside Apple and below names like Alphabet, AMD and Amazon, despite once being very bullish on it. x.comÂ
MercadoLibre's long-term thesis looks intact: heavy reinvestment is holding down near-term margins, but if it drives continued growth and eventually operating leverage, margins and earnings could expand substantially. The stock was extremely expensive five years ago, and its valuation has compressed significantly since. As with Amazon, the market doesn't trust the spending yet, but Meta showed how fast that can change. x.com x.comÂ
MercadoLibre is a short because credit is deteriorating in its finance business and e-commerce competition in Brazil is pressuring margins, while it trades at a huge premium to anything comparable. x.com x.comÂ
Sea Limited's strong execution and regained management trust make the beaten-down stock a buy here. After a rough two years following Covid, it faces less competition in its home markets than Amazon or MercadoLibre face in theirs, yet its stock trades very low. Existing holders should be loading up or question their conviction; long-term margins remain uncertain for both Sea and MercadoLibre. x.comÂ
Latin American equities' sell-off looks overdone as long as the underlying businesses keep growing and fundamentals remain intact. Under that condition, the drop is market noise, and MercadoLibre and Nu Holdings could offer attractive opportunities amid the panic. x.comÂ
MercadoLibre may not be a buy yet, since its margin-compressing investment cycle looks set to run for a while. An AI-assisted review of gross and operating margins against prior investment cycles points that way, after a first read of the risk/reward had looked like a buy. The stock is worth revisiting at the end of the year. x.com x.comÂ