MercadoLibre Stock Just Plunged After Earnings. Buy the Dip -- or Run for the Hills?
Key Points
MercadoLibre is the dominant e-commerce company in Latin America, where the space is still underpenetrated.
There's a massive opportunity, and the company is investing to capture it.
Margins were pressured in the 2025 fourth quarter, and EPS missed Wall Street's expectations.
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MercadoLibre (NASDAQ: MELI) stock has crushed the market over many years. But it took a sharp turn downward after the company's fourth-quarter earnings release, and it's lost 12% of its value year to date.
Is this a sign of trouble, or an opportunity to buy on the dip?
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What's going right
MercadoLibre is bursting at the seams as it generates a shift to e-commerce and digital financial solutions for its Latin American markets. There's relentless demand for its products and services, and it's attracting new users at a high rate.
Image source: The Motley Fool.
In the 2025 fourth quarter, revenue growth was a robust 47% year over year (currency neutral), with a 37% increase in gross merchandise volume and a 53% rise in total payment volume. It added 6.4 million new customers in Q4 alone, a 24% increase year over year, and items ordered increased 43%. The company is benefiting from a strong flywheel effect, where more customers join, more suppliers want to be on the platform, and more new products are attracted to the site.
What's more, the opportunity is still vast. E-commerce penetration is about 15 percentage points behind the U.S. and even more behind China, and many users in its markets face high barriers to access in the banking system. As a leader in both spaces, MercadoLibre stands to benefit from the shift for many years to come.
What's going wrong
The market seems to have been spooked about a dip in profitability in Q4. Operating margin dropped from 13.5% the previous year to 10.1% in the 2025 fourth quarter, and net income margin dropped from 10.5% to 6.4%. Earnings per share were $11.04, coming in $0.41 below analyst estimates.
Management claims it's short-term pressure for long-term gain. It's investing in all kinds of initiatives to capture market share, boost interest in its platform, and protect its first-mover's edge. These are products like its new credit card and digital banks in Mexico and Argentina, as well as services like lowering its free shipping threshold in Brazil.
"We remain confident these investments strengthen our ecosystem, deepen our competitive advantages, and expand the long-term growth runway in a region where both e-commerce and financial services remain meaningfully underpenetrated," CFO Martín de Los Santos said.
This isn't the first time MercadoLibre's profits have declined due to what management calls investing in the future, and it's part of the natural ups and downs of being in a growth business.
If you're looking for an excellent growth stock to buy, this could be an opportunity to buy MercadoLibre stock on the dip.
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Jennifer Saibil has positions in MercadoLibre. The Motley Fool has positions in and recommends MercadoLibre. The Motley Fool has a disclosure policy.
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