2 Stocks That Are Crushing the Market This Year But Have More Room to Run

Key Points

• MercadoLibre and Netflix have significantly beaten the market so far this year.

• Both should benefit from their respective leadership positions in rapidly growing markets.

• 10 stocks we like better than MercadoLibre ›

Even amid the volatility caused by President Donald Trump's aggressive trade policies, broader equities are doing pretty well this year, and some companies have performed even better. That's the case with MercadoLibre (NASDAQ: MELI) and Netflix (NASDAQ: NFLX): The former is up by 34% this year, while the latter has climbed 35%.

Even after these impressive runs, however, both MercadoLibre and Netflix still have considerable growth potential for investors willing to hold on to their shares for a while. Here's why investors can still add shares of these companies to their portfolios.

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1. MercadoLibre

MercadoLibre is the leading e-commerce player in Latin America. One reason the stock has performed so well this year is that, unlike some of its U.S.-based peers, it could avoid some of the impact of Trump's tariffs. Of course, no company is entirely tariff-proof, but MercadoLibre appears to be a safer option for investors concerned about this. Besides that, MercadoLibre's financial results have been strong. In the second quarter, the company's revenue increased by 34% year over year to $6.8 billion. MercadoLibre's net income declined slightly, by 1.5%, to $523 million due to currency exchange fluctuations and a higher effective tax rate, issues that should not plague the company consistently.

Overall, MercadoLibre performed well and its ecosystem continues to grow, with increasing users and buyers, growing total payment volume for its fintech arm, and more. The complementary nature of MercadoLibre's services is one of its strengths. Besides its e-commerce and fintech offerings, it has a logistics segment and a business that helps merchants set up online storefronts. For companies that become part of its ecosystem -- which has the broadest reach on the continent -- it's hard to leave, which grants MercadoLibre a solid moat in the form of switching costs.

MercadoLibre has also invested a significant amount of money in building a logistics and fulfillment infrastructure across various South American countries, some of which are politically unstable. It's not an easy feat to replicate what the company has done -- that's one of the reasons why even the giant Amazon trails MercadoLibre in that region. Even with mounting competition, including from Sea Limited's Shopee, MercadoLibre should remain the leader for the foreseeable future and profit from the rapidly growing e-commerce and fintech industries.

The stock may or may not maintain its momentum through the end of the year, but over the next decade, MercadoLibre could deliver market-beating returns.

2. Netflix

Netflix's business is also somewhat insulated from the direct impact of tariffs. The company generates revenue through subscription fees and advertising for its streaming service, a business model that doesn't rely on imported goods, on which tariffs can be levied. Additionally, Netflix continues to benefit from the switch away from traditional cable television and into streaming. The company is the OG of the streaming industry, and it hasn't wasted its first-mover advantage.

Netflix benefits from tremendous brand power. That's why the company can increase its prices, as it did in January, without seeing a significant impact on subscriber count or sales. For the second quarter, Netflix's revenue increased by 15.9% year over year to $11.1 billion. The company's earnings per share grew 47.3% to $7.19, while free cash flow was $2.3 billion, up 86.9% compared to the prior-year quarter.

Netflix's success is largely due to its content strategy. Whether licensing existing shows or movies or creating its own, its large ecosystem of viewers grants it the data it needs to make even better decisions next time around, which attracts even more viewers in a classic case of the network effect. That won't change anytime soon, considering Netflix controls less than 10% of television viewing time in each country where it operates.

Further, Netflix's advertising business is still relatively new. And while it does not release how much it makes from that business, some analysts estimated that in 2024, Netflix's advertising revenue was $1.3 billion, with $1 billion coming from the U.S. That's a mere fraction of the $39 billion in revenue it reported last year. In other words, the company's ecosystem can still expand significantly, with more subscribers leading to increased engagement, a higher share of television viewing time, and additional revenue, including from advertising. The stock is far from having peaked, despite its excellent performance this year.

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Prosper Junior Bakiny has positions in Amazon and MercadoLibre. The Motley Fool has positions in and recommends Amazon, MercadoLibre, Netflix, and Sea Limited. The Motley Fool has a disclosure policy.