MercadoLibre or Meli as its shareholders adoringly call it, operates under six distinct branches of business. The dominant ones are the Market Place and Mercado Pago, the region’s leading digital payments name. On top of this MercadoLibre also operates a credit line, a real estate division, and MercadoShops which is a software platform that helps sellers get started in the MarketPlace. Let’s take a look at how MercadoLibre is set to perform over 2021 and beyond. Learn more
The Bullish Case: Like with Amazon (NASDAQ:AMZN) in the United States, MercadoLibre is the leading name in Latin America for eCommerce. Despite its rapidly growing stock price, MercadoLibre has still been on many institutional investor and analyst buy lists, as Wall Street firmly believes that MercadoLibre is still poised for growth following the COVID-19 pandemic. In a region of the world where structured banking systems are not always solidified, Mercado Pago offers mobile and digital payments that are rapidly replacing traditional bank accounts. In a world that is continuing to push towards digital eCommerce, MercadoLibre is poised to remain the leader in Latin America for the foreseeable future. Some wonder about MercadoLibre’s moat, but in terms of Mercado Pago, the only real threat right now could be PayPal (NASDAQ:PYPL), although PayPal has a significant investment in MercadoLibre so they may well be leaving the region alone. However, the eCommerce industry is fast becoming an aggressive one, and we’ll talk about this moat in the Bearish Case section.
Final Verdict:Amazon and Sea Limited encroaching on Latin America is enough concern to be slightly bearish about MercadoLibre’s long-term growth potential. It will probably never be replaced, but if enough competition enters the market, MercadoLibre will find it difficult to continue to succeed as much as it has over the last decade. Given the current climate, I actually prefer shares of Sea Limited over MercadoLibre at this point in time.