Why MercadoLibre Stock Dropped 16% in the First Half of the Year

MercadoLibre (NASDAQ: MELI) Stock fell 16% in the first half of 2026, according to data provided by S&P Global Market Intelligence. It reported declining profits for two consecutive quarters.

The dominant tech company in Latin America

MercadoLibre enjoys a leading position in e-commerce and fintech in 18 Latin American countries. It consistently demonstrates high growth as it generates a shift to online shopping, and since its markets lag behind other global regions, it still has a vast opportunity. For example, e-commerce penetration in the U.S. is 27%, while it's only 14% in Latin America.

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The company is reporting incredible growth across segments and metrics. Total revenue increased 49% year over year in the 2026 first quarter, driven by both e-commerce and fintech. In e-commerce, gross merchandise volume (GMV) was up 42% over last year, with a 26% increase in unique active buyers. Items sold were up 47%, and items sold per unique buyer were up 16%. That's particularly impressive considering the number of new customers.

There was major growth in Brazil, its largest market, since it lowered its free shipping threshold in the country from $R79 to $R19.

Fintech is a similar story. Total payment volume was up 50% year over year, with a 29% increase in monthly active users to 83 million. The credit portfolio was up 87%, and assets under management were up 77%.

Laying the groundwork for the future

Despite the fantastic performance, MercadoLibre stock has plunged because profits are declining. In the first quarter, operating income fell 20% from last year, and operating margin dropped from 12.9% last year to 6.9% this year.

Management says it's focusing on the future. It sees a massive long-term opportunity, and it has the potential to gain the most with its first-mover's edge. "When your business is behaving like this, we believe the right response is not to harvest -- it is to invest," it said.

In Mexico, for example, more than half of the population relies on informal credit sources, while 85% pays for purchases under $30 with cash. In Argentina, while 80% of the population has a bank account, its use of credit is far below that of Brazil. Management sees the region as ripe for continued disruption, and the company has high customer satisfaction, which it takes as a mandate to improve the industry.

At the current price, MercadoLibre stock trades at 47 times trailing 12-month earnings, an attractive entry point for new investors.

Jennifer Saibil has positions in MercadoLibre. The Motley Fool has positions in and recommends MercadoLibre. The Motley Fool has a disclosure policy.