My Smartest Growth Stock to Buy Today

MercadoLibre (NASDAQ: MELI), the largest e-commerce company in Latin America, has been an amazing growth stock. A $1,000 investment in its shares two decades ago would be worth $89,400 today. That same investment in the S&P 500 would only have grown to $4,250.

Some investors might be hesitant to chase MercadoLibre as it hovers near its all-time highs, but I think it's still one of the smartest growth stocks to buy today.

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MercadoLibre dominates the Latin American market

MercadoLibre was founded in 1999. As Latin America's income levels and internet penetration rates rose, it established a first mover's advantage in the region's nascent e-commerce market. It spent its early years striking partnerships with regional logistics partners, expanding its reach across areas with challenging terrain and underdeveloped infrastructure, localizing its marketplace with different currencies and languages, and tackling local regulatory issues.

Image source: Getty Images.

With those investments, MercadoLibre established an entrenched position in Latin America's growing e-commerce market. eBay also invested in the company in 2001, and that support helped it attract a lot more attention from overseas investors. Today, MercadoLibre operates in 19 Latin American countries, though most of its customers are located in Brazil, Mexico, and Argentina.

It also locks in its customers with an expanding ecosystem of fintech services. These include its digital payment platform, Mercado Pago; its credit platform, Mercado Crédito; and its other digital-wallet and crypto-trading services.

From 2004 to 2024, MercadoLibre's annual revenue rose at a compound annual growth rate (CAGR) of nearly 45%, from just $13 million to $20.8 billion. Amazon, which has barely made a dent in the Latin American market, grew its total revenue at a CAGR of 25%, from $6.9 billion to $638 billion, during those two decades.

MercadoLibre still has room to grow

In 2024, MercadoLibre served more than 100 million unique active buyers on its marketplace, and 60 million monthly active users (MAUs) with its fintech services. However, that still only represents about a third of the combined adult population of Brazil, Mexico, and Argentina.

As the company expanded, economies of scale kicked in and reduced its logistics, marketing, and payment processing expenses. As a result, it turned consistently profitable in 2021 -- and its net income increased at a staggering CAGR of 184% over the following three years.

Looking ahead, Grand View Research expects the Latin American e-commerce market to expand at a CAGR of 16.7% from 2024 to 2030, while IMARC Group predicts the region's fintech market will expand at a CAGR of 15.9% from 2025 to 2033. Those long-term catalysts could drive sales and profits even higher over the next decade.

The stock could still soar

From 2024 to 2027, analysts expect MercadoLibre's revenue and net income to rise at CAGRs of 25% and 34%, respectively. That growth should be driven by the expansion of its fintech ecosystem (especially among third-party businesses), the expansion of its fulfillment network, and its increased adoption in smaller markets like Chile and Colombia.

MercadoLibre's investments in artificial intelligence (AI) could also bear fruit and improve its logistics routing, customer targeting, fraud prevention, and credit underwriting capabilities. A potential spinoff of Mercado Pago could even unlock the subsidiary's value and help it compete more effectively against Nu Holdings, the largest direct bank in Latin America.

That seems like an incredible growth trajectory for a stock that trades at 38 times next year's earnings. Its valuation might still be compressed by near-term concerns about inflation, political unrest, and social conflicts in Latin America, but the company is still growing rapidly as it deals with those challenges. If those headwinds dissipate, it could command a much higher valuation.

MercadoLibre might go through some volatile swings over the next few years, but I believe it will keep heading higher over the next few decades. That's why I'm still holding my shares -- even after a gain of more than 100% -- and I won't be selling them anytime soon.

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John Mackey, former CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool's board of directors. Leo Sun has positions in Amazon and MercadoLibre. The Motley Fool has positions in and recommends Amazon, MercadoLibre, and eBay. The Motley Fool recommends Nu Holdings. The Motley Fool has a disclosure policy.