The Market Has Punished MercadoLibre Stock -- Is That Your Buying Opportunity?

One previously high-flying stock that has suffered in recent years is MercadoLibre (NASDAQ: MELI). The Latin American conglomerate faces rising competition in its e-commerce business as well as setbacks as it attempts to expand its fintech operations.

Amid the sell-off, the consumer discretionary stock trades at a discount of almost 40% from its all-time high. Now, the question for investors is whether that punishing sell-off amounts to a buying opportunity in the stock.

I believe it does, and one reason explains why.

Image source: The Motley Fool.

The state of MercadoLibre

Put simply, MercadoLibre stock is a buy because it has and continues to play the long game.

Historically, the company built its success by turning Latin America's challenges into business opportunities. Mercado Pago's financial products, designed to help cash-based customers buy on MercadoLibre's e-commerce site, positioned the company to become a regional fintech leader. Likewise, Mercado Envios brought the company into the logistics business, in part by making same-day and next-day delivery available to e-retailers.

Today, the company is again working to turn current business challenges into competitive advantages. Such is the case with the compressed margins in its e-commerce business, something that does not make the stock more attractive on the surface.

Despite those difficulties, MercadoLibre's growth is accelerating, but even with 49% revenue growth in the first quarter of 2026, net income of $417 million actually fell 16% from year-ago levels. Along with the aforementioned lower margins, the company spent more than $1.24 billion to cover bad loans from its rapidly growing lending business, up from $603 million one year ago. That higher expense cut into its profitability.

However, despite that financial pain, such moves will likely enhance MercadoLibre's competitive advantage over time. As the first mover in Latin American e-commerce, MercadoLibre has long led in this industry. Now, e-commerce heavyweights from other parts of the world, like Amazon, Sea Limited, and numerous smaller players, seek to build market share in Latin America's developing markets.

Still, over time, compressed margins tend to force smaller players out of the market. That could better position MercadoLibre to claim a higher market share as fewer companies compete.

On the fintech side of the business, MercadoLibre has noticed a rise in doubtful accounts. Amid that challenge, MercadoLibre has begun using AI to help borrowers make better financial decisions and has expanded loan terms to make it easier for them to repay loans. Assuming the company can limit non-performing loans, it could bode well for MercadoLibre as it becomes an increasingly prominent lender.

Finally, MercadoLibre sells at an increasingly attractive valuation. Indeed, a 43 P/E ratio may sound high. Nonetheless, Amazon's stock routinely traded at more than 50 times earnings in its earlier growth years, which could prompt investors to view MercadoLibre's current P/E ratio differently.

The MercadoLibre buying opportunity

MercadoLibre is a buy because it continues to invest in itself.

Understandably, compressed margins and falling profits may not impress investors at first glance. However, MercadoLibre has decided to tolerate thinner margins and higher bad loan expenses to better position itself in the marketplace. If investors can bring themselves to overlook short-term challenges and play the long game, it could pay off in the long term.

Will Healy has positions in MercadoLibre and Sea Limited. The Motley Fool has positions in and recommends Amazon, MercadoLibre, and Sea Limited. The Motley Fool has a disclosure policy.