Core Insights - MercadoLibre's (MELI) third-quarter 2025 earnings showed strong revenue growth but missed earnings expectations, indicating underlying issues despite a 39.5% year-over-year revenue increase to $7.41 billion, surpassing estimates by 2.15% [1] - Earnings per share of $8.32 fell short of consensus by 11.77%, highlighting concerns over profitability amid competitive pressures and margin erosion [1][9] Revenue and Growth - Revenue surged 39.5% year over year to $7.41 billion, driven by aggressive scaling in commerce and fintech [1][2] - Operating income increased by 30% year over year to $724 million, but operating margin decreased to 9.8% from 10.5% in the previous year [2] Margin and Cost Pressures - Brazil's reduction of the free-shipping threshold from R$79 to R$19 led to a 42% increase in items sold and a 34% rise in gross merchandise volume, but also inflated fulfillment and logistics costs, resulting in a decline in Brazil's direct contribution margin [3] - Gross margin contracted to 49% from 52% year over year due to higher shipping subsidies and increased infrastructure costs [3] Regional Challenges - In Argentina, revenue growth of 39.5% in U.S. dollars masked a 97% increase in local currency, primarily driven by inflation rather than real consumption [4] - Peso depreciation and rising funding costs negatively impacted profitability, with foreign-exchange losses more than doubling from the previous year [4] Competitive Landscape - Amazon's expansion in Brazil and Mexico poses a significant threat to MELI's logistics advantage, as it can sustain free-shipping incentives longer and at a lower cost [6] - Nubank is emerging as a major competitor in fintech, eroding MELI's dominance in digital payments and consumer credit, with over 100 million users and a low-cost model [7] - Sea Limited's Shopee is increasing pressure on MELI's marketplace through aggressive discounts and subsidies, impacting MELI's take rates [8] Valuation and Market Performance - MELI's stock has risen 35.6% year-to-date, outpacing industry averages, but this growth may not be sustainable without improvements in profitability [10] - Trading at a price-to-earnings ratio of 38.44X, MELI is at a premium compared to industry and sector averages, which may be difficult to justify given ongoing margin compression [12] Conclusion - Despite being a regional leader, MELI's third-quarter results reveal a growing gap between growth and profitability, with compressing margins and increasing competition [14] - The stock's premium valuation and recent performance suggest that current optimism may not align with underlying fundamentals, indicating potential downside risks [14]

Core Insights - MercadoLibre (MELI) is expected to report third-quarter 2025 results on October 29, with revenues estimated at $7.25 billion, reflecting a year-over-year growth of 36.55%, and earnings per share estimated at $9.43, indicating a growth of 20.43% year-over-year [1] Revenue Estimates - The Zacks Consensus Estimate for third-quarter 2025 revenues in Argentina is $1.56 billion, representing a 51.4% increase from the previous year [4] - Brazil's revenue estimate stands at $3.92 billion, indicating a 34.5% year-over-year increase [4] - Mexico's revenue is projected at $1.67 billion, reflecting a 45.7% increase from the year-ago quarter [4] - Revenues from other countries are estimated at $293.12 million, suggesting a 32.6% increase year-over-year [5] Earnings Performance - MELI has beaten the Zacks Consensus Estimate in two of the last four quarters, with an average surprise of 14% [2] - Currently, MELI has an Earnings ESP of -0.21% and a Zacks Rank of 4 (Sell), indicating a lower likelihood of an earnings beat [3] Competitive Landscape - Intense competition in Latin America is expected to impact MELI's performance, with Amazon enhancing delivery speed and product range, and Sea Limited's Shopee platform attracting customers through aggressive discounting [6][7] - Nubank's expanding financial services are also expected to increase competitive pressure on MELI [7] Margin Pressures - The company is facing margin pressures due to increased shipping subsidies and marketing expenses, which may affect third-quarter results [8] - Operating margin contraction of 210 basis points in the previous quarter indicates rising profitability strain [6] Macroeconomic Factors - Political and macroeconomic conditions in Argentina, including corruption allegations and currency depreciation, are likely to negatively impact MELI's growth efficiency [10] - High local interest rates and a persistent non-performing loan ratio of 18% are expected to sustain asset quality concerns [10] Stock Performance and Valuation - MELI's shares have increased by 27.1% year-to-date, outperforming the Retail-Wholesale sector and the S&P 500 [12] - The stock trades at a forward Price-to-Sales ratio of 3.2X, significantly higher than the industry average of 2.23X, suggesting that current valuations may overstate near-term growth potential [15] - The Value Score of D indicates stretched multiples and limited re-rating potential until earnings visibility improves [15] Conclusion - The upcoming third-quarter results are anticipated to show resilient revenue growth but continued margin pressures due to higher fulfillment costs and competitive intensity [18] - The elevated valuation and lack of operating leverage recovery suggest a cautious near-term outlook for MELI [18]

Core Insights - MercadoLibre's (MELI) growth is heavily reliant on Brazil, Mexico, and Argentina, which together account for over 82% of total revenues, exposing the company to regional volatility [1][7] - Brazil's high inflation and tight monetary policy are constraining consumer spending, while Argentina faces political turbulence and Mexico deals with governance inefficiencies, all of which impact MELI's operations [2][3] - The Zacks Consensus Estimate for MELI's Q3 2025 total revenues is $7.18 billion, reflecting a 35.08% year-over-year growth, but the reliance on stressed markets raises concerns about future performance [3][4] Regional Exposure - Brazil, Mexico, and Argentina are critical to MELI's revenue, with Brazil projected to generate $3.9 billion (up 34.5% YoY), Argentina $1.57 billion (up 52.4% YoY), and Mexico $1.64 billion (up 43.5% YoY) [3] - The concentration in these markets makes MELI vulnerable to inflation, currency fluctuations, and political instability, which could hinder growth momentum [2][3][4] Competitive Landscape - In contrast to MELI, competitors like Amazon and Sea Limited benefit from geographic diversification, reducing their exposure to localized economic and political risks [4] - Amazon's balanced revenue streams across North America, Europe, and Asia, along with Sea Limited's operations in multiple Southeast Asian markets, provide them with a competitive edge [4] Stock Performance and Valuation - MELI shares have increased by 25.4% year-to-date, outperforming the Zacks Internet–Commerce industry (up 5.1%) and the Zacks Retail-Wholesale sector (up 3.3%) [5] - The stock is currently trading at a forward Price/Sales ratio of 3.22X, higher than the industry's 2.23X, indicating a potential overvaluation [9] - The Zacks Consensus Estimate for 2025 earnings is $43.23 per share, reflecting a 14.7% year-over-year growth, but the estimate has decreased by 43 cents over the past month [11]

Core Insights - MercadoLibre (MELI) is facing challenges in sustaining its aggressive credit expansion strategy, with signs that rapid lending growth may negatively impact profitability in upcoming quarters [1][4] Group 1: Credit Portfolio and Profitability - The total credit portfolio increased by 91% year over year to $9.3 billion in Q2 2025, but the Net Interest Margin After Losses decreased to 23% from 31.1% a year ago, indicating potential erosion of returns [1][8] - The credit card segment grew 118% year over year to $4 billion, now representing 43% of the total portfolio, up from 37% last year; however, credit cards have lower margins and only recently reached breakeven [2][4] - Provisions for doubtful accounts rose by 57% year over year to $690 million, suggesting that underwriting discipline will be tested as the company expands in volatile markets [2][3] Group 2: Earnings and Economic Environment - Net income for Q2 slipped 1.6% year over year to $523 million, as credit costs offset growth in commerce and payments [3] - Economic uncertainty in Argentina, following corruption charges against President Javier Milei, and Brazil's history of delayed credit card payments add to the challenges for MELI [3][4] Group 3: Competitive Landscape - Regional fintech competition is intensifying, with Sea Limited and Nu Holdings navigating margin pressures; Nu Holdings has maintained stronger credit discipline compared to MELI's aggressive credit card growth strategy [5] - Sustainable lending growth is suggested to depend on balanced risk management, highlighting vulnerabilities in MELI's current approach [5] Group 4: Stock Performance and Valuation - MELI shares have increased by 46.5% year-to-date, outperforming the Zacks Internet–Commerce industry and the Zacks Retail-Wholesale sector, which rose by 12.2% and 8.6%, respectively [6] - The stock is currently trading at a forward 12-month Price/Sales ratio of 3.8X, compared to the industry's 2.26X, indicating a higher valuation [10] - The Zacks Consensus Estimate for 2025 earnings is $44.43 per share, reflecting a 17.88% year-over-year growth, with a Zacks Rank of 4 (Sell) [13]

Core Insights - MercadoLibre (MELI) is the leading e-commerce and fintech platform in Latin America, but faces challenges in maintaining margins amid macroeconomic pressures [1] Economic Conditions - Inflation in MELI's core markets remains high, with Brazil at 5.13%, Mexico at 3.57%, and Argentina at 33.6%, impacting transport, labor, and credit operations [2] - These inflationary pressures increase costs for MELI, making expansion strategies more expensive due to higher shipping subsidies and wage bills [2] Financial Performance - In Q2 2025, MELI's sales and marketing expenses rose nearly 50% due to inflation, while credit growth reached $9.3 billion, but net interest margin after losses fell to 23% from 31.1% [3] - Operating margin contracted by 210 basis points to 12.2%, indicating ongoing profitability challenges [3][8] Revenue Estimates - The Zacks Consensus Estimate for Q3 2025 revenues is $7.27 billion, with significant contributions expected from Brazil ($3.82 billion), Mexico ($1.63 billion), and Argentina ($1.66 billion) [4] Competitive Landscape - MELI's concentration in Brazil, Mexico, and Argentina exposes it to regional inflation risks, unlike competitors like Amazon and Sea Limited, which have broader geographic footprints [5] Stock Performance and Valuation - MELI shares have increased 37.5% year-to-date, outperforming the Zacks Internet–Commerce industry (12.5%) and the Retail-Wholesale sector (9.5%) [6] - The stock is trading at a forward Price/Sales ratio of 3.59X, compared to the industry's 2.26X, indicating a higher valuation [10] Earnings Estimates - The Zacks Consensus Estimate for 2025 earnings is $44.43 per share, reflecting a downward revision of 20 cents, with a projected year-over-year growth of 17.88% [13]