Is MercadoLibre's Expanding Credit Portfolio Becoming a Growing Risk?

Core Insights - MercadoLibre's Mercado Pago division has evolved into a significant lender, with a credit portfolio reaching $11 billion by Q3 2025, marking an 83% year-over-year increase [1] - The rapid loan deployment raises concerns about risk management and asset quality, as the company operates in a complex e-commerce ecosystem [2] - The net interest margin after losses (NIMAL) decreased to 21%, and early-stage non-performing loans (NPLs) were at 6.8%, indicating potential stress in the portfolio [3] Financial Performance - The Zacks Consensus Estimate for Q4 2025 Fintech revenues is projected at $3.63 billion, reflecting a 45% year-over-year growth, but also raising concerns about the risk profile due to rapid credit deployment [4] - MELI's share price has increased by 21% year-to-date, outperforming the Zacks Internet-Commerce industry and the Retail-Wholesale sector [7] Competitive Landscape - MercadoLibre faces strong competition from Sea Limited and Nu Holdings, both of which are aggressively expanding into consumer credit in Latin America [5] - Sea Limited is focusing on personal loans and payment products in Brazil and Mexico, while Nu Holdings is leveraging its user base and analytics to target low-risk borrowers [6] Valuation Metrics - MELI's stock is trading at a forward 12-month Price/Sales ratio of 2.96X, compared to the industry's 2.34X, indicating a higher valuation [11] - The Zacks Consensus Estimate for MELI's Q4 2025 earnings is $11.85 per share, down 18.7% over the past 30 days, suggesting a decline of 6.03% year-over-year [13]