Why MercadoLibre Stock Is Sinking This Week

Key Points

• Analysts are worried about MercadoLibre's top-dog status in Brazil as Amazon eyes further expansion there.

• However, the company has faced endless competition, yet it is still a 24-bagger over the last decade alone.

• With a best-in-class logistical network in Latin America -- and a growing suite of financial products for customers -- MercadoLibre won't be quickly disrupted.

• 10 stocks we like better than MercadoLibre ›

Leading Latin American e-commerce and fintech titan MercadoLibre (NASDAQ: MELI) is down 10% this week as of 3 p.m. ET on Thursday, according to data provided by S&P Global Market Intelligence.

This decline stems from a major news outlet and numerous analysts reiterating concerns for the company as Amazon launches its most aggressive expansion in Brazil (MercadoLibre's largest market) yet.

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Amazon announced that it would waive all fulfillment by Amazon (FBA) logistics fees and take rates on FBA orders for new Brazilian merchants through the holiday season.

Prime time to grow in Brazil?

While MercadoLibre has faced no shortage of competition from a wide array of peers over the years, Amazon certainly is the 1,000-pound gorilla in the room (or e-commerce warehouse).

However, as dominant as Amazon is in the United States, it currently has to play the role of underdog (albeit a well-armed one) in Brazil.

Buoyed by its industry-leading logistical network, burgeoning customer ecosystem that not only includes e-commerce but also numerous fintech solutions and credit options, MercadoLibre won't be easy to disrupt.

Image source: Getty Images.

Over just the last decade, MercadoLibre has been a 24-bagger.

These jaw-dropping results occur despite facing competition from:

• Amazon, Walmart, and Costco moving into Mexico.
• Sea Limited's e-commerce unit Shoppee expanding to Brazil.
• China-based Shein and PDD Holding's Temu providing Latin America with a multitude of low-cost goods.

Latin America is a promising growth area for many stocks -- especially e-commerce -- so this competition is going nowhere.

However, MercadoLibre's immense growth optionality and booming ecosystem for its customers should give it a leg up on its peers.

It'll be worth watching how Amazon does this holiday season as it entices new merchants onto its Brazilian marketplace, but MercadoLibre remains best in class in Latin America.

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Josh Kohn-Lindquist has positions in Costco Wholesale, MercadoLibre, and Sea Limited. The Motley Fool has positions in and recommends Amazon, Costco Wholesale, MercadoLibre, Sea Limited, and Walmart. The Motley Fool has a disclosure policy.