MercadoLibre Is Down 16% This Year While Growing Revenue 49%. Is This the Best Dip to Buy?

In a year when tech stocks are rallying, MercadoLibre (NASDAQ: MELI) is a laggard. Latin America's leader in e-commerce, payments, logistics, and other fintech offerings is trading 16% lower in 2026. There are some good reasons for MercadoLibre's pullback in recent months. The headwinds are real. However, don't sleep on the tailwinds.

The Latin American bellwether is growing at an impressive pace, and some of the near-term challenges that are squeezing margins could prove temporary. Let's go over the bad, and the good, to see whether this is a dip worth buying or the start of more pain to come.

Image source: Getty Images.

First up, the headwinds

There have been plenty of ups and downs for MercadoLibre's stock, and the latest downturn is the 17% drop it experienced over the six trading days following the company's disappointing first-quarter report. MercadoLibre turned in a strong quarter of top-line growth -- and we'll get to that shortly -- but it was a dud on the bottom line. MercadoLibre has fallen short of Wall Street's profit targets in three of its past four quarters.

Two things are weighing on MercadoLibre's profitability. The first is the cutthroat nature of Brazil's online retail market. Overseas competitors are willing to incur losses to establish a presence in a region that's still in its early stages of digital development. One popular lever to drive sales is to slash the minimum order size for free delivery, and MercadoLibre has had to do just that to remain the top dog on its home turf.

The other major factor weighing on MercadoLibre's bottom line is the popularity of its loan products. MercadoLibre's credit portfolio has jumped 87% over the past year. Beyond increasing MercadoLibre's overall risk profile, initiating loans entails an accounting hit for potential loss provisions.

The loss provisions and shrinking e-commerce margin in Brazil are leading analysts to whittle down their profit projections. In the past three months alone, Wall Street estimates have declined by 28% for this year and 25% for 2027.

Tailwinds, for the win

You can't deny that MercadoLibre is a growth stock. Revenue soared 49% (or 46% on a foreign-exchange neutral basis) in the first quarter of this year. Its Mercado Pago payment platform processed $87.2 billion in transactions during the quarter, a 50% increase. Its flagship e-commerce business is serving 84.1 million active buyers, a 26% increase over the past year. The presence of hungry competition isn't eating into MercadoLibre's engagement, as gross merchandise volume spiked 42% for the quarter.

Despite the near-term drag on reported profitability, its net cash from operating activities doubled during the period. The pace of the initial loss provisions should slow over time, and with MercadoLibre's commitment to protecting its e-commerce stronghold with lower price minimums, it's just a matter of time before its rivals start to buckle.

MercadoLibre is currently trading at 42 times this year's earnings and less than 30 times next year's target earnings. These aren't cheap multiples, but the results are depressed given what should be temporary margin pressure. The risks are certainly there, but in MercadoLibre's 19 years of public trading, the company has typically rewarded taking a chance on its shares when there's a pullback. This dip feels like an opportunity for long-term investors.

Rick Munarriz has positions in MercadoLibre. The Motley Fool has positions in and recommends MercadoLibre. The Motley Fool has a disclosure policy.