MercadoLibre stock has declined even after the company posted 49% year-over-year revenue growth in the first quarter, as investors grow cautious over shrinking profitability. Operating margins nearly halved to 6.9% from 12.9% a year earlier, pressured by aggressive investments in logistics, lower free-shipping thresholds in Brazil, and expansion of Mercado Pago, while competition from Sea Limited's Shopee and PDD Holdings' Temu intensifies. Despite the margin compression, the underlying business is strengthening, with gross merchandise volume climbing, Mercado Pago expanding across payments and digital banking, and Mercado Ads emerging as a meaningful growth engine. The stock now trades at a price-to-sales multiple of 2.9, well below the double-digit levels seen during the 2020-2021 boom, which some see as a potential opportunity if management can convert current investments into stronger long-term economics. However, the article notes that calling it a once-in-a-decade buying opportunity sets a high bar, given persistent e-commerce competition and Latin America's challenging macroeconomic environment.
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Sea LtdMercadoLibre Inc.Operating margins nearly halved to 6.9% from 12.9%, driven by aggressive investments, causing stock drop despite 49% revenue growth.
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