1 Growth Stock I'd Buy Before PDD In 2026

PDD (NASDAQ: PDD), China's third-largest e-commerce company after Alibaba (NYSE: BABA) and JD.com (NASDAQ: JD), went public on July 26, 2018 at $19 per ADS. On Feb. 17, 2021, its stock closed at its all-time high of $202.82.

That rally was fueled by the explosive growth of its discount marketplace, its market share gains against Alibaba and JD, and the expansion of its online agricultural business. It expanded by selling cheaper products in China's lower-tier cities, encouraging its shoppers to team up to score bigger bulk discounts, and bypassing supermarkets by directly connecting farmers to consumers. It also launched a cross-border marketplace, Temu, to connect its Chinese merchants to overseas buyers.

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From 2018 to 2024, PDD's revenue grew at a CAGR of 76%. It also turned profitable in 2021, and its net income increased at a CAGR of 144% over the following three years. Those stunning growth rates made it one of the fastest-growing e-commerce companies globally.

But from 2024 to 2027, analysts expect its revenue and net income to grow at a more modest CAGR of 12% and 7%, respectively, as its business matures. It's facing stiffer competition from Alibaba and China, while the unpredictable tariffs are throttling Temu's overseas expansion.

PDD's stock has pulled back to about $110 and appears to be a bargain at ten times next year's earnings, but its high-growth days might be over. The persistent trade tensions between the U.S. and China could also continue to compress its valuations. Instead of betting on PDD's turnaround next year, investors should take a closer look at another high-growth e-commerce company, MercadoLibre (NASDAQ: MELI), which may have more upside potential.

How fast is MercadoLibre growing?

MercadoLibre, founded in Argentina in 1999 and currently headquartered in Uruguay, is the largest e-commerce company in Latin America. It established a first-mover's advantage by localizing its marketplace for different countries, expanding its logistics network across challenging terrain, and securing its customers with its Mercado Pago digital payments platform.

MercadoLibre now operates its marketplace across 19 Latin America countries, but it generates most of its revenue in Brazil, Argentina, and Mexico. Its Mercado Pago platform has also expanded and evolved into a full-fledged fintech ecosystem with its own digital wallet, credit platform (Mercado Crédito), crypto trading tools, and banking services.

From 2018 to 2024, MercadoLibre's revenue grew at a CAGR of 56%. It also turned consistently profitable in 2021, and its net income grew at a CAGR of 184% over the following three years. At the end of 2024, it served over 100 million annual unique active buyers and 60 million fintech monthly active users. However, that only represents a fraction of the 668 million people (including 451 million adults) who live across the Latin American and Caribbean region.

MercadoLibre is saturating its three largest markets, but it's still expanding in smaller and higher-growth markets, such as Chile, Colombia, Peru, and Ecuador. According to Grand View Research, Latin America's e-commerce market is expected to continue expanding at a robust CAGR of 17.4% from 2024 to 2030, as the region's income levels and internet penetration rates rise.

Why could MercadoLibre have more upside potential than PDD?

From 2024 to 2027, analysts expect MercadoLibre's revenue and net income to grow at a CAGR of 29% and 62%, respectively. That growth should be driven by its sales of more profitable products on its first-party marketplace and the expansion of its third-party, higher-margin credit and advertising businesses. Its improving scale should continue to dilute its logistics, payment processing, and marketing costs per order.

MercadoLibre should also profit from its competitors' setbacks. Americanas, its biggest rival in Brazil, struggled with a disastrous accounting scandal over the past two years. Singapore's Sea Limited (NYSE: SE), which launched its Shopee marketplace in Latin America in 2019, shut down most of those regional marketplaces over the following six years. Amazon (NASDAQ: AMZN) also struggled to expand its presence in Latin America over the past decade.

MercadoLibre's business is gradually maturing, but it still has more upside potential than PDD. It might seem a lot pricier at 34 times next year's earnings, but its stronger growth, broader diversification, and wider moat all justify that higher valuation.

Leo Sun has positions in Amazon and MercadoLibre. The Motley Fool has positions in and recommends Amazon, MercadoLibre, and Sea Limited. The Motley Fool recommends Alibaba Group and JD.com. The Motley Fool has a disclosure policy.