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MercadoLibre (NASDAQ:MELI | MELI Price Prediction) trades at $1,799.21 against a Wall Street consensus target of $2,214.88, an implied gap of roughly 23%. Scotiabank’s Hector Maya carries a Sector Outperform rating and $2,800 Street-high target on the stock, which implies roughly 55% upside, well above the 40% threshold that flags an outlier call.

MercadoLibre runs Latin America’s dominant e-commerce and fintech ecosystem, pairing the Mercado Libre marketplace with Mercado Pago payments, Mercado Envios logistics, advertising, and a fast-scaling credit card book. The stock sits on a bruised Q1 2026 print that has the market debating temporary land grab versus structural damage.

Margins Collapsed and the Market Reacted Violently Revenue hit $8.85 billion, up 49% year-over-year and beating the $8.32 billion consensus, but operating income fell 20% to $611 million, operating margin compressed roughly 600 basis points to 6.9%, and adjusted free cash flow flipped negative at -$56 million. Shares dropped 15.8% in the first week after the print.

Provisions for doubtful accounts more than doubled to $1.244 billion, and management disclosed it had extended average Brazilian loan terms from 5 months to 8 months while pushing into riskier borrower segments. Multiple law firms opened securities investigations, and the CFO signaled the aggressive investment posture would continue through 2026 with no near-term margin relief expected.

Why 20 of 24 Analysts Still Rate It Buy The bull case, most aggressively voiced by Maya, frames this as a deliberate margin reset that will reverse once the current investment cycle matures. MercadoLibre is spending near-term operating income to lower free-shipping thresholds, scale first-party retail, and issue credit cards at a pace that grew the portfolio 104% year-over-year to $6.6 billion. Maya argues that at $2,800 the stock trades at roughly 28x NTM EV/FCF, which underprices a company compounding revenue at 20% plus in a region where e-commerce penetration is still mid-teens.

Brazil revenue grew 55% year-over-year, Mexico 62%, advertising revenue 73%, and fintech assets under management 77% to nearly $20 billion. Coverage sits at 20 Buy, 4 Hold, 0 Sell, with Jefferies among recent upgraders and Daiwa the notable trim. Bulls want operating margin re-expansion visible by early 2027 as newer card cohorts season and shipping subsidies stop growing as a share of revenue.

The Peer Group Did Not Fall Together Sea (NYSE:SE) is off 17.79% year to date on the same reinvestment story inside its Monee fintech unit. At $104.88 against a $142.26 analyst target, upside runs about 36% behind 27 Buys and 2 Holds.

Nu Holdings (NYSE:NU), Mercado Pago’s most direct LatAm rival, has slipped 13.32% year to date after its own Q1 credit-provision spike. At $14.51 versus a $17.94 target, upside is roughly 24% with 19 Buys, 2 Holds, and 1 Sell.

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Amazon (NASDAQ:AMZN) is the exception, up 6.08% year to date on AWS strength. At $244.85 against a $312.87 target, upside is about 28% behind 62 Buy ratings and no Sells.

Across the four names, Scotiabank’s $2,800 MELI target remains the largest single upside call.

Where the Numbers Land Against the S&P 500 MELI is down 10.68% year to date and 24.55% over the past twelve months. The S&P 500 has climbed 9.6% year to date and 18.85% over the same year, so the stock trails the index by more than 20 percentage points YTD.

Consensus target of $2,214.88 implies about 23% upside; Maya’s $2,800 implies close to 55%. Coverage runs 24 analysts deep, institutional ownership sits at 87.62%, and the trailing P/E is roughly 48, leaving limited room for further margin misses.

My Take: Cautiously Constructive at Current Levels The bull path holds if operating margin bottoms within two quarters and Brazil credit provisions stabilize as the extended-duration loan book seasons. In that path, revenue keeps compounding above 40% and the multiple re-rates. Maya’s $2,800 simply requires the current investment cycle to prove out on schedule.

The bear path plays out if the loan-duration extension turns out to be underwriting drift to hit growth targets. Rising provisions, 8-month terms, and a softer Brazilian consumer would trap the business in a lower-margin profile, and at 48x earnings there is no cushion for that outcome.

My lean is cautiously constructive. The reinvestment metrics are landing, but I’d anchor closer to the consensus $2,214 target than to $2,800 until the next quarter confirms the credit book is behaving.

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An employee of e-commerce MercadoLibre works at the company's offices in Buenos Aires, Argentina September 6, 2024. REUTERS/Agustin Marcarian Purchase Licensing Rights, opens new tab

SANTIAGO, July 23 (Reuters) - E-commerce firm MercadoLibre (MELI.O), opens new tab has discussed a proposal with Chilean authorities to operate as a pharmacy in the country, a plan that would require a change in ​local regulations, records of meetings between the parties showed.

The move would mark the latest step ‌by Uruguay-based MercadoLibre, once primarily a marketplace for external sellers, toward expanding its own retail operations while deepening its push into pharmacies after a similar pilot in Brazil.

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MercadoLibre, which operates across Latin America and is one of the region's largest ​firms by market capitalization, met with Chilean officials at least six times in the past year. ​Meeting minutes revealed MercadoLibre's previously unreported plan to operate an in-house and online-only ⁠pharmacy model in Chile.

The plan would expand the firm's Chile operations, where, as in Argentina, Mexico and other markets, ​MercadoLibre currently only sells medication from third-party retailers.

After hearing the plan, Chile's health ministry recommended that MercadoLibre seek ​a technical evaluation from the nation's Public Health Institute (ISP), since the proposal would require regulatory changes or reinterpretations, according to records from a January meeting.

ISP in a written response to a request for comment did not detail whether MercadoLibre had ​requested that evaluation. It said MercadoLibre currently does not have authorization to operate an in-house drugstore in ​Chile, and that current regulations do not allow for the operation of an online-only drugstore.

Chile's health ministry did not ‌respond to ⁠requests for comment.

MercadoLibre said in a statement to Reuters that it was working to gradually expand its health offering, adapting to each market's regulatory framework. It declined to comment specifically on plans in Chile.

As part of a broader long-term business strategy, the firm has increased investment in its in-house retail operations in ​recent quarters, focusing on segments ​such as beauty and ⁠household appliances.

That strategy has pressured margins, causing the stock to tumble almost 11% so far this year to $1,799 each.

In Brazil, its biggest market, MercadoLibre bought a physical drugstore last year ​due to local rules requiring a brick-and-mortar presence for companies selling medicines. ​It began a ⁠pilot there in March selling over-the-counter medicines, promising delivery in an average of up to three hours. It has yet to expand outside of Sao Paulo.

The firm's pitch in Chile also included deliveries in "a few hours ⁠in some ​regions," according to minutes from a meeting in September.

Chile lags ​behind the company's largest markets of Brazil, Mexico and Argentina, but a successful rollout there could serve as a model for expansion ​across Latin America.

Reporting by Kylie Madry in Santiago and Andre Romani in Sao Paulo; Editing by Mark Porter

Our Standards: The Thomson Reuters Trust Principles., opens new tab

Kylie Madry is a headline news reporter covering business, politics and breaking news for all of Latin America. She's based out of the Reuters office in Mexico City, where she was previously a freelance journalist and translator working on award-winning podcasts, books about Mexico's drug lords and stories ranging from the fight for clean water to the millions spent on the city's surveillance system. Kylie is originally from Dallas, Texas.

Key Takeaways MercadoLibre issued 2.7 million cards in Q1 2026, lifting its card portfolio 104% to $6.6 billion.The card boosts marketplace conversion, GMV per user and transaction frequency through cross-selling.Its 15-90-day NPL ratio fell 80 basis points as expansion advanced in Mexico and Argentina. MercadoLibre, Inc. (MELI - Free Report) continues to deepen its ecosystem integration through its credit card business, which is emerging as a central driver of user engagement. During the first quarter of 2026, the company issued 2.7 million credit cards, expanding its credit card portfolio by 104% year over year to $6.6 billion. This growth brought credit card balances to 46% of the total credit portfolio, up from 42% in the prior-year period. Total payment volume for credit cards surged 90% year over year, while monthly active users increased 68%.

The credit card plays a strategic role in converting marketplace-only buyers into active fintech participants. Management emphasizes that this product strengthens the cross-sell flywheel by lifting marketplace conversion rates, boosting gross merchandise volume per user and increasing overall transaction frequency across the platform. Rich proprietary data from marketplace interactions allows the firm to enhance underwriting precision continuously. As a result, credit asset quality improved as the card’s 15-90-day non-performing loan ratio declined by 80 basis points year over year.

In Brazil, older cardholder cohorts are maturing steadily, helping offset the initial margin dilution associated with rapid card expansion. Based on predictable payback periods and solid credit performance, MercadoLibre is expanding credit card issuance in Mexico and scaling early-stage efforts in Argentina. By combining high consumer engagement with refined risk models, the credit card operation proves that fintech expansion directly reinforces core marketplace performance.

What the Latest Metrics Say About MercadoLibreMercadoLibre, which competes with Amazon.com, Inc. (AMZN - Free Report) and Sea Limited (SE - Free Report) , has seen its shares tumble 15% over the past six months compared with the industry’s 2.5% decline. While Amazon shares have jumped 6.6%, Sea Limited has fallen 14% in the aforementioned period.
 

Image Source: Zacks Investment Research

From a valuation standpoint, MercadoLibre's forward 12-month price-to-earnings (P/E) ratio stands at 35.89, higher than the industry’s ratio of 21.92. The stock is also trading above its 12-month median level of 34.46.

MercadoLibre is trading at a premium to Amazon (with a forward 12-month P/E ratio of 26.08) and Sea Limited (21.16).

Image Source: Zacks Investment Research

The Zacks Consensus Estimate for MercadoLibre’s current financial-year sales and earnings per share implies year-over-year growth of 39.7% and 4.1%, respectively. For the next fiscal year, the consensus estimate indicates a 26.6% rise in sales and 44.4% growth in earnings.

Image Source: Zacks Investment Research

MELI currently carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

After MercadoLibre (MELI +0.85%) delivered another year of more than 30% revenue growth in 2025, you might have expected the stock to surge. Instead, the stock went the other way.

Why? Because the narrative surrounding MercadoLibre has changed. A few years ago, investors were asking how big the company could become. Today, they're asking whether it can sustain its growth while protecting profitability.

That shift in sentiment has weighed on MercadoLibre stock. But it also raises an important question: Has the market become too pessimistic about one of Latin America's highest-quality technology companies?

Image source: Getty Images.

Why have investors become more cautious? MercadoLibre's business isn't slowing down. In fact, in the first quarter, revenue grew 49% year over year. What has changed is that its economics have simply become more complicated.

Over the past year, the company has invested aggressively to solidify its leadership in the e-commerce and fintech spaces in its core markets. It has expanded its logistics network, lowered free-shipping thresholds in Brazil, and continued pouring capital into Mercado Pago.

Those investments have strengthened the platform, but they've also increased costs.

At the same time, competition has intensified. Sea Limited's Shopee is competing aggressively in Brazil through shipping subsidies and attractive seller incentives. PDD Holdings' Temu is reshaping consumer expectations around pricing with ultra-cheap goods shipped from China.

As a result, MercadoLibre's operating margins have come under pressure, almost halving from 12.9% to 6.9%.

In other words, the market isn't questioning whether MercadoLibre can continue growing. It's questioning whether that growth will create long-term shareholder value.

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The business is getting stronger Ironically, if you ignored the share price and looked only at the operating business, you might conclude MercadoLibre is stronger today than it was three years ago.

Revenue is growing at an impressive pace. Gross merchandise volume keeps climbing. Mercado Pago is expanding across payments, lending, investments, and digital banking. Meanwhile, Mercado Ads has become another meaningful growth engine, allowing the company to monetize its marketplace more effectively.

More importantly, these businesses reinforce one another. The marketplace attracts buyers and merchants. Mercado Pago makes transactions easier while deepening customer relationships. Mercado Envios improves delivery speed and reliability. Mercado Ads gives merchants another reason to invest in the platform.

Each business becomes more valuable because the others exist. That integrated model makes MercadoLibre increasingly difficult to replicate, even as competition intensifies.

Has the valuation become more attractive? The market's increasingly cautious stance toward the company has had another effect: The stock's valuation has become far more reasonable.

During the COVID-19 pandemic, investors valued MercadoLibre like a high-growth marketplace with enormous potential. Today, the company has evolved into a much larger and more diversified business, yet it trades at a price-to-sales (PS) multiple of 2.9, well below the double-digit PS multiples seen during the 2020 and 2021 boom.

That lower valuation reflects legitimate concerns. Investors want proof that today's heavy investments will eventually translate into stronger margins, higher earnings, and expanding free cash flow.

But that's also where the opportunity may lie. If management succeeds in turning today's logistics investments, fintech expansion, and merchant services into stronger long-term economics, today's valuation could prove surprisingly attractive in hindsight.

What does it mean for investors? Calling any stock a once-in-a-decade buying opportunity sets an exceptionally high bar.

MercadoLibre hasn't earned that label with certainty. E-commerce competition remains intense. Margin pressure could persist longer than investors expect. And Latin America's macroeconomic environment has never been easy to navigate.

Yet the ingredients of an exceptional long-term investment remain firmly in place. MercadoLibre benefits from a dominant market position, several secular growth drivers, expanding network effects, and a management team that's willing to invest for the long term rather than maximize short-term earnings.

The best investments rarely look obvious when expectations are low. They emerge when a great business continues improving while the market focuses on near-term uncertainty.

MercadoLibre may be entering exactly that phase.

When investors think about MercadoLibre (MELI +1.11%), they typically think of one of the world's best growth stories. The company has spent years building Latin America's leading e-commerce marketplace, while simultaneously growing Mercado Pago into one of the region's largest digital financial platforms.

Yet, despite another year of impressive operating results, the stock hasn't rewarded investors as it once did. So what's happening?

The answer isn't slowing growth. It's that investors have become increasingly concerned about MercadoLibre's cost of maintaining that growth.

Image source: Getty Images.

Growth isn't the problem By almost every operating measure, MercadoLibre is executing exceptionally well. Revenue has grown by more than 30% year over year to $29 billion, supported by healthy increases in gross merchandise volume, unique buyers, and payment volume.

Payments platform Mercado Pago is attracting new users while expanding deeper into lending, investments, and digital banking. Meanwhile, the company is investing billions of dollars to strengthen its logistics network and payments infrastructure across Brazil, Mexico, and Argentina.

These aren't the numbers of a business that's losing momentum. Instead, they reinforce the same long-term investment thesis that has driven MercadoLibre's success for years: Latin America's digital economy remains underpenetrated, and the company continues to strengthen its leadership position.

If growth were the only thing investors cared about, MercadoLibre's stock would probably be performing much better.

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Investors are becoming less tolerant of lower margins Instead, the market's attention has shifted to profitability.

During 2025, MercadoLibre increased spending on logistics, lowered free-shipping thresholds in Brazil, and leaned more heavily on promotions to defend its competitive position. Those investments helped drive higher engagement and transaction volumes, but they also weighed on operating margins. For perspective, net margin has fallen from 10.5% in the fourth quarter of 2024 to 6.4% in the fourth quarter of 2025.

That has created a different debate among investors. The question is no longer whether MercadoLibre can continue growing. It's whether that growth is becoming more expensive.

This distinction matters because companies can grow revenue for years while delivering disappointing shareholder returns -- if profitability fails to keep pace. In short, investors have become increasingly focused on whether MercadoLibre can eventually convert its scale into stronger earnings and free cash flow.

Competition has intensified in recent years Part of that concern stems from a more competitive landscape.

Shopee, a subsidiary of Sea Limited, has continued expanding aggressively in Brazil through shipping subsidies, attractive seller incentives, and low prices. Another newcomer, Temu, a subsidiary of PDD Holdings, has reset consumer expectations by offering ultra-cheap products shipped directly from China. On the fintech side, Nu Holdings is competing for consumers' wallets and financial relationships.

None of these companies individually poses a threat to MercadoLibre's leadership. Collectively, however, they force MercadoLibre to invest more aggressively to defend its ecosystem. For perspective, the company aims to invest $11 billion in its Brazilian market in 2026, up 50% from 2025.

That has important implications for investors. Competition doesn't have to reduce MercadoLibre's market share to affect the business. Just defending its leadership may require permanently higher logistics spending, more promotions, or lower seller fees, which could impact the company's long-term profitability.

What does it mean for investors? MercadoLibre remains one of the strongest businesses in Latin America. Its marketplace, logistics network, and fintech ecosystem reinforce one another, creating competitive advantages that few companies in the region can match.

But the stock is no longer being judged solely on growth. Investors also want proof that MercadoLibre can translate its expanding ecosystem into improving profitability. Until that happens, the stock may continue to experience volatility, even as the underlying business scales. Long-term investors need to be aware of this.

MercadoLibre (MELI +1.27%) Stock fell 16% in the first half of 2026, according to data provided by S&P Global Market Intelligence. It reported declining profits for two consecutive quarters.

The dominant tech company in Latin America MercadoLibre enjoys a leading position in e-commerce and fintech in 18 Latin American countries. It consistently demonstrates high growth as it generates a shift to online shopping, and since its markets lag behind other global regions, it still has a vast opportunity. For example, e-commerce penetration in the U.S. is 27%, while it's only 14% in Latin America.

Image source: Getty Images.

The company is reporting incredible growth across segments and metrics. Total revenue increased 49% year over year in the 2026 first quarter, driven by both e-commerce and fintech. In e-commerce, gross merchandise volume (GMV) was up 42% over last year, with a 26% increase in unique active buyers. Items sold were up 47%, and items sold per unique buyer were up 16%. That's particularly impressive considering the number of new customers.

There was major growth in Brazil, its largest market, since it lowered its free shipping threshold in the country from $R79 to $R19.

Fintech is a similar story. Total payment volume was up 50% year over year, with a 29% increase in monthly active users to 83 million. The credit portfolio was up 87%, and assets under management were up 77%.

Laying the groundwork for the future Despite the fantastic performance, MercadoLibre stock has plunged because profits are declining. In the first quarter, operating income fell 20% from last year, and operating margin dropped from 12.9% last year to 6.9% this year.

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Management says it's focusing on the future. It sees a massive long-term opportunity, and it has the potential to gain the most with its first-mover's edge. "When your business is behaving like this, we believe the right response is not to harvest -- it is to invest," it said.

In Mexico, for example, more than half of the population relies on informal credit sources, while 85% pays for purchases under $30 with cash. In Argentina, while 80% of the population has a bank account, its use of credit is far below that of Brazil. Management sees the region as ripe for continued disruption, and the company has high customer satisfaction, which it takes as a mandate to improve the industry.

At the current price, MercadoLibre stock trades at 47 times trailing 12-month earnings, an attractive entry point for new investors.

Key Takeaways Brazil's FX-neutral GMV growth rose to 38%, while items sold surged 56% in the first quarter.Lower free shipping threshold helped attract new customers and lift purchase frequency in Brazil.Brazil unit shipping costs fell 17% in local currency as same and next-day shipments rose 39%. MercadoLibre, Inc.’s (MELI - Free Report) first-quarter 2026 performance suggests Brazil is becoming one of the important growth engines. While the company continued to deliver healthy momentum across Latin America, Brazil stood out for accelerating growth in both commerce and customer engagement, supported by sustained investments in logistics, pricing and the user experience. The market has evolved beyond being MercadoLibre’s largest contributor by scale and is now driving some of its strongest operating trends.

The clearest evidence came from the marketplace business. Brazil’s FX-neutral gross merchandise volume (GMV) growth accelerated to 38% in the first quarter from 35% in the preceding quarter, while items sold surged 56%, up from 45% in the fourth quarter and 42% in the third quarter of 2025. The company attributed the improvement largely to its lower free-shipping threshold, which continued to attract new customers and encourage higher purchase frequency. Brazil also fueled a record year-over-year increase of 17 million unique active buyers, helping MercadoLibre’s total unique active buyers grow 26%.

The stronger demand is also improving operating efficiency. Same and next-day shipments increased 39% year over year, driven particularly by accelerating volumes in Brazil. At the same time, unit shipping costs in Brazil declined 17% in local currency from the prior year, improving from an 11% reduction in the preceding quarter despite significantly higher shipment volumes. This demonstrates that rising scale is helping offset the costs of MercadoLibre’s free-shipping initiatives.

Brazil is also reinforcing MercadoLibre’s broader ecosystem strategy. The company highlighted continued strength in Mercado Pago, while its credit card business in Brazil has reached a stage where older customer cohorts are maturing as expected, supporting further expansion. Together, these trends suggest Brazil is no longer just MercadoLibre’s biggest market by scale, but one of the clearest drivers behind its accelerating marketplace growth.

What the Latest Metrics Say About MercadoLibreMercadoLibre, which competes with Amazon.com, Inc. (AMZN - Free Report) and Sea Limited (SE - Free Report) , has seen its shares jump 1.6% over the past three months compared with the industry’s 7.3% rise. While shares of Amazon have rallied 15.3%, those of Sea Limited have advanced 24.4% in the aforementioned period.
 

Image Source: Zacks Investment Research

From a valuation standpoint, MercadoLibre's forward 12-month price-to-earnings (P/E) ratio stands at 34.42, higher than the industry’s ratio of 21.07. The stock is trading marginally below its 12-month median level of 34.44.

MercadoLibre is trading at a premium to Amazon (with a forward 12-month P/E ratio of 25.61) and Sea Limited (20.54).

Image Source: Zacks Investment Research

The Zacks Consensus Estimate for MercadoLibre’s current financial-year sales and earnings per share implies year-over-year growth of 39.7% and 4%, respectively. For the next fiscal year, the consensus estimate indicates a 26.6% rise in sales and 47% growth in earnings.

The consensus estimate for earnings per share for the current and next fiscal year has fallen by $6.87 and $6.95 to $40.97 and $60.22, respectively, over the past 30 days.

Image Source: Zacks Investment Research

MELI currently carries a Zacks Rank #5 (Strong Sell). The rank reflects near-term earnings pressure despite the company’s strong top-line momentum. Although revenues increased 49% year over year in the first quarter, operating margin fell to 6.9% from 12.9% a year ago, and Net Interest Margin After Losses declined to 17.8% from 22.7% as the credit portfolio expanded. With accelerated investments continuing to weigh on profitability, earnings leverage may remain limited in the near term. The Zacks Consensus Estimate for second-quarter earnings calls for a 15.7% year-over-year decline.

You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

MercadoLibre (MELI +3.06%) might not be a household name in the U.S., but Foolish investors know the Latin American e-commerce company as a standout on the stock market.

Since its 2007 IPO, MercadoLibre is up more than 5,000%, and it's built an Amazon-like network of businesses as it expands across Latin America, including in logistics, fintech, credit, and asset management. It's also added its Prime-like MELI+ membership program to help lock customers into its ecosystem.

While MercadoLibre has continued to put up strong growth numbers, the stock has struggled over the last year, falling 36% in a steady decline.

MELI data by YCharts

That sell-off isn't unwarranted, as there are several reasons why investors have sold off MercadoLibre stock. Let's take a look at those challenges before discussing whether MercadoLibre is a buy.

Image source: MercadoLibre.

What's ailing MercadoLibre? The biggest reason for MercadoLibre's slide is that its profits are falling. In the first quarter, despite a 49% jump in revenue, operating income slipped from $763 million to $611 million.

The decline in profits has come primarily as the company has faced increased competition in Brazil from Sea Limited's Shopee, PDD Holdings' Temu, Amazon, and others. Brazil is MercadoLibre's biggest market, representing about half of its revenue.

To push back against competition, MercadoLibre lowered its free shipping threshold in Brazil, or the minimum order value to get free shipping, which helped accelerate GMV growth to a currency-neutral 38%.

Management first introduced free shipping in 2016, which had a similar headwind on profit margins, but paid off over the longer run, and it expects the lower free shipping threshold to do the same.

The company is also investing in cross-border trade for merchants in China and the U.S., giving them the option to work with the regional leader rather than Amazon or Temu. It's given sellers easier access to free shipping and other incentives, and it opened its first fulfillment center in China to improve relationships with merchants there.

MercadoLibre's margins are also compressing due to the growth of lower-margin businesses, including its first-party e-commerce business and its credit business, which saw a modest rise in delinquency rates in the first quarter.

The credit business introduces a new risk for MercadoLibre, but management sees it as a key driver for the company's two principal businesses, e-commerce and fintech. Its credit portfolio increased 87% to $14.6 billion in the first quarter, and it issued 2.7 million MercadoPago credit cards.

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It's understandable why falling profits would send MercadoLibre stock lower. After all, this is a stock that has historically traded at a premium valuation priced for growth.

However, the overall picture of the company is that the margin compression is primarily the result of its own decision-making to prioritize long-term growth over short-term profits in a shifting competitive landscape. That's a smart move, and it's similar to the strategy that worked so well for Amazon.

While competition may be impacting MercadoLibre's performance, market share wars don't last forever, as the experience of industries like ridesharing and food delivery has shown. Additionally, MercadoLibre actually gained market share in the first quarter, and its structural advantages, like its MercadoEnvios logistics network, should ensure that it maintains its leadership in Brazil and elsewhere. Management also believes that there's a long runway for growth in Latin American e-commerce as the average Latin American makes just seven online purchases a year, compared to 41 for the average American, so there can be more than one winner here.

The margin pullback is likely temporary, and these investments should pay off. In the meantime, MercadoLibre continues to deliver strong revenue growth, up 49% in the first quarter, a sign of a healthy business despite the bottom-line woes.

With the e-commerce stock down nearly 40% from its peak, MercadoLibre is worth buying here. The long-term growth outlook still looks strong.