Is Michael Burry Right About MercadoLibre?

Michael Burry is one of the most followed investors working today. The longtime head of the hedge fund Scion Asset Management gained fame from The Big Short, when his huge bet on the housing crash paid off in 2008.

That tale established Burry as a top contrarian investor, and investors have followed his moves since. Burry shut down his hedge fund last year and now shares his thoughts and investments on his Substack. One of his most intriguing ideas this year has been MercadoLibre (NASDAQ:MELI). The stock is now down nearly a third from its peak in 2025, even as tech stocks and the S&P 500 are hovering around all-time highs.

The Latin American e-commerce star has been a top performer on the market since its IPO in 2007, but has struggled more recently due to concerns about competition, falling margins, and its risky venture into the credit business.

MercadoLibre got some good news on Monday as the stock popped 9.7% as Brazilian stocks rallied in response to Flavio Bolsonaro's strong showing in yesterday's election, as Bolsonaro is regarded as the pro-business candidate. However, Burry has been making his case for months.

Image source: MercadoLibre.

Why Burry is bullish on MercadoLibre

Burry has also gotten attention for short bets against Nvidia and Palantir, and that's part of his thesis behind MercadoLibre. He believes investors have piled into popular AI stocks, leaving strong companies like MercadoLibre trading at bargain prices. He compared it to 1999, when the rush into tech stocks left quality names in other industries trading at attractive prices.

The contrarian investor also argued that management was making a smart long-term move by investing in areas like logistics, lower free shipping thresholds, and growing its credit business. He has cited MercadoLibre's strong top-line growth as evidence that those investments are paying off.

MercadoLibre's unbeatable track record

It's understandable why MercadoLibre would pull back on lower margins, as competitors like Amazon and Sea Limited have stepped up their investments in the market.

However, one data point offers a good reminder of MercadoLibre's prowess and its unrivaled growth potential.

It just became the first major company to grow revenue by 30% over 30 consecutive quarters, something no other large publicly traded company has done.

The company managed to do that by expanding its e-commerce business across Latin America, investing in its logistics service to support that growth, and scaling its MercadoPago fintech business in Brazil and Mexico. That growth streak is a tribute to management's execution, the opportunity the company has in Latin America, and the potential it has in new businesses like credit.

Is MercadoLibre a buy?

The sell-off in MercadoLibre seems to signal that investors believe that its profit margin will be impaired over the long term or that competition will continue to eat into its market share and profitability.

However, I tend to agree with Burry that MercadoLibre's investments are paying off in its growth rate, and it's a mistake to assume the business is in trouble. Revenue jumped 50%, or 43% on a currency-neutral basis, to $10.2 billion in its second quarter, with strong growth in both fintech and e-commerce.

Meanwhile, key metrics like assets under management per user and items sold per buyer continue to move higher, showing the business continues to gain scale. Analysts also expect earnings growth returning next year, calling for earnings per share to jump nearly 50% to $55.95, meaning it's trading around 33 times next year's expected earnings.

That looks like a great price to pay for a company with MercadoLibre's history of growth and its potential. The stock continues to look like a strong buy.

Jeremy Bowman has positions in Amazon, MercadoLibre, and Nvidia. The Motley Fool has positions in and recommends Amazon, MercadoLibre, Nvidia, Palantir Technologies, and Sea Limited. The Motley Fool has a disclosure policy.