Should You Buy MercadoLibre Stock Before Aug. 5?
Key Points
MercadoLibre continues to demonstrate outstanding growth, including a 49% year-over-year increase in revenue in the first quarter.
It's deeply investing in its platform to capitalize on its long-term opportunity.
Operating margin fell from 12.9% last year to 6.9% this year in the first quarter.
- 10 stocks we like better than MercadoLibre ›
MercadoLibre (NASDAQ: MELI) sorely disappointed investors this year, and its stock is 25% off its recent high. The company has been reporting solid growth, but profits have been under pressure as the company invests for the future.
Will this change when the company reports second-quarter earnings on Aug. 5?
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MercadoLibre is an e-commerce giant operating in 18 Latin American countries, and it's been growing by leaps and bounds. It typically reports strong double-digit growth, such as a 49% year-over-year increase in revenue in the 2026 first quarter.
That was driven by both its e-commerce and fintech divisions, which are also catching on in the region. Management sees the long-term opportunity, and since its markets lag behind the U.S. and other markets, the company is capitalizing on it through deep investments in its business.
Recently, that included lowering the free shipping threshold in its largest market, Brazil. That led to a slew of positive results, including accelerating gross merchandise volume growth to 38% and items sold growth to 56%. Management said, "When your business is behaving like this, we believe the right response is not to harvest -- it is to invest."
The problem is, the market isn't liking these investments because operating income is dropping. In the first quarter, it fell 20% from last year to $611 million, and the operating margin narrowed from 12.9% to 6.9%.
The stock is already climbing back up as it approaches the second-quarter report. That could mean the time to buy is now. Not because the stock might jump after the report, which could happen, but because the company has excellent long-term prospects, and you might not be able to get in at a bargain price in the future.
Should you buy stock in MercadoLibre right now?
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Jennifer Saibil has positions in MercadoLibre. The Motley Fool has positions in and recommends MercadoLibre. The Motley Fool has a disclosure policy.
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