Should You Invest in the Amazon of Latin America?

Key Points

• The Latin America e-commerce market is growing rapidly.

• One company dominates regional online marketplaces.

• 10 stocks we like better than MercadoLibre ›

It may sound strange to call a company the Amazon of Latin America, but of course we're talking about e-commerce giants, not rainforests.

And Latin American e-commerce giant MercadoLibre (NASDAQ: MELI) -- the name means "free market" in Spanish -- lives up to the moniker.

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Founded in 1999 in Argentina and currently headquartered in Uruguay, the company is the e-commerce and fintech leader in Latin America, where it hosts the largest online commerce and payments ecosystem.

The company is the largest marketplace in Latin America, with a presence in 18 countries spanning Central and South America. Brazil accounts for about 57% of the company's marketplace sales, though there's been strong growth in Mexico and Argentina, too.

MercadoLibre operates online auction and buying/selling platforms similar to those of Amazon.com and eBay. It has platforms and services for users to create online stores, similar to Shopify. It also offers world-class delivery services, including next-day delivery, that handle 90% of packages moving through its system.

Image source: Getty Images.

The company also provides fintech solutions for payments similar to PayPal, including digital accounts and insurance, as well as online classified listings like those of Craigslist.

Its Mercato Pago unit offer users the ability to process payments, hold and move money, pay bills, apply for loans and credit lines, and invest savings.

And of course there is advertising -- and advertising revenue for MercadoLibre -- throughout the entire shopping, buying, selling, and auctioning experiences.

All that adds up to a market cap of about $123 billion, making MercadoLibre the second-largest company in the region by that metric.

Ongoing rapid growth

MercadoLibre continues to grow rapidly. It had almost 71 million active buyers in the second quarter, up 25% from a year ago. Gross merchandise volume -- a key metric for every e-commerce company -- soared 37% when adjusted for currency fluctuations. Users of its fintech products grew 30% to about 67 million.

The company has three core markets -- Argentina, Brazil, and Mexico -- and it's thriving in all three. Gross merchandise volume rose 75% in Argentina last quarter, 29% in Brazil, and 32% in Mexico.

As a result of all that growth, revenue rose 34% year over year to nearly $6.8 billion. While earnings of $10.31 a share slightly missed expectations, the company said the miss was due to an expansion of free shipping in Brazil, an investment decision that may pay handsomely down the line.

Analysts expect full-year 2025 revenue to rise 35% to $28.1 billion and earnings per share to increase about 18% to $44.42 a share.

Upside potential

The untapped opportunity for MercadoLibre is enormous. Latin America has a population of nearly 670 million and a combined GDP of $7.3 trillion. The International Monetary Fund projects continued robust growth in the region, with GDP rising 2.4% in South America next year and 3.9% in Central America (Argentina's economy is expected to expand 4.5%). The region's economic expansion is being driven by consumer spending -- exactly what drives MercadoLibre's top and bottom lines.

The Latin America e-commerce market is expected to grow at an average rate of almost 11% a year through 2033.

Perhaps that's why the stock is up 40% so far in 2025. Yes, the forward price-to-earnings ratio, at 53, makes the stock a bit pricey. But future earnings growth -- estimates are 18% growth this year and another 51% in 2026, driven by smart corporate strategy, favorable demographics, and economic growth -- may render that P/E ratio sensible, even conservative, in retrospect.

Investors are piling into emerging markets stocks right now. But not all EM countries, regions, or companies are the same. So smart investors will be picky.

If you believe, as I do, that e-commerce will continue to grow in Latin America as it has in the United States and Europe, this stock is the way to play it.

Should you invest $1,000 in MercadoLibre right now?

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Matthew Benjamin has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Amazon, MercadoLibre, PayPal, Shopify, and eBay. The Motley Fool recommends the following options: long January 2027 $42.50 calls on PayPal and short September 2025 $77.50 calls on PayPal. The Motley Fool has a disclosure policy.