Shares of MercadoLibre Inc. (MELI) rose sharply on Wednesday, climbing 5.6% to $1,671.72 on the Nasdaq, after Morgan Stanley reaffirmed its bullish stance on the Latin American e-commerce and fintech powerhouse. The stock, which opened for regular trading at 1:29 p.m. EDT, remains well below its 52-week high of $2,645.22, reflecting lingering concerns over profitability despite robust top-line growth.
Morgan Stanley analyst Andrew R. Ruben reiterated a Buy rating and maintained a price target of $2,450 in a research note published Wednesday, according to TipRanks. The broader analyst consensus rates the stock as a Moderate Buy, with an average target of $2,191.43.
The positive analyst call comes as MercadoLibre navigates a delicate balance between rapid expansion and margin compression. The company reported first-quarter net revenue and financial income of $8.8 billion, a 49% year-over-year surge. However, operating income came in at $611 million, and net income totaled $417 million, representing a 15.6% decline from the prior-year period, missing analyst expectations. Operating margin slipped to 6.9% as the company invested heavily in free shipping and credit growth.
“We are willing to sacrifice these short-term profits because we think that the opportunity is worth it,” said Leandro Cuccioli, senior vice president of investor relations, in an interview with Reuters. The company’s strategy of offering free shipping and expanding its credit portfolio has pressured margins but is seen as essential for capturing market share in key regions.
In Brazil, MercadoLibre’s largest market, gross merchandise value rose 38% in the first quarter, while items sold jumped 56%. CFO Martin de los Santos noted that shipment costs dropped 17% in local currency, saying, “Higher demand is driving lower cost.” The fintech arm, Mercado Pago, also posted strong growth, with monthly active users reaching 83 million, up 29% year over year. Its credit portfolio expanded 87% to $14.6 billion, and the credit card book more than doubled to $6.6 billion, with 2.7 million cards issued during the quarter.
Competition remains intense, particularly from Amazon and Sea Ltd’s Shopee in Brazil and Mexico. CEO Ariel Szarfsztejn emphasized that both countries remain top priorities. The company faces risks if loan growth outpaces funding or if shipping costs remain elevated. Szarfsztejn told Reuters that the firm “could sell part of the loan book” to manage funding, noting that “the toughest challenge for a credit portfolio that is growing so fast is having the right funding mechanisms in order to scale.”
MercadoLibre’s stock story underscores the tension between high-growth ambitions and near-term profitability, a dynamic that will continue to shape investor sentiment as the company pursues its long-term vision across Latin America.
