Does MercadoLibre's Expanding Credit Book Elevate Risk in 2026?

Core Insights - MercadoLibre (MELI) is entering 2026 with a credit profile significantly exposed to borrower stress, funding cost fluctuations, and macroeconomic volatility, as lending expansion becomes the primary driver of fintech growth [1] - The Zacks Consensus Estimate for MELI's fourth-quarter 2025 fintech revenues is projected at $3.63 billion, reflecting a 45% year-over-year increase, but this growth increasingly relies on consumer lending rather than lower-risk payment volumes [1] Group 1: Credit Risk and Macroeconomic Conditions - The rapid pace of credit expansion raises credit risk due to a higher share of early-stage cohorts that have not been tested through a complete economic cycle, leading to increased default volatility [2] - Argentina's inflation accelerated to 31.4% in November 2025, reversing earlier disinflation trends, which erodes real purchasing power and increases repayment stress for unsecured borrowers [3] - MELI's credit card launch in Argentina coincides with renewed price instability, placing first-year cohorts at risk [3] Group 2: Competitive Landscape - MercadoLibre faces intense competition from Sea Limited and Nu Holdings, which adopt a more cautious approach to credit expansion, thereby reducing balance-sheet exposure [5] - Sea Limited prioritizes payments-led growth, while Nu Holdings operates under a regulated banking framework, allowing for more gradual credit scaling with tighter underwriting discipline [5] Group 3: Share Price Performance and Valuation - MELI shares have declined by 21% over the past six months, underperforming the Zacks Internet-Commerce industry and the Zacks Retail-Wholesale sector, which saw increases of 1.6% and 1.5%, respectively [6] - Currently, MELI stock trades at a forward 12-month Price/Sales ratio of 2.71X, compared to the industry's 2.12X, indicating a relatively higher valuation [10] - The Zacks Consensus Estimate for MELI's fourth-quarter 2025 earnings is $11.66 per share, reflecting a 7.53% year-over-year decline [12]