One of the most popular tech stocks in the last decade is MercadoLibre (NASDAQ:MELI), a Latin American company. MELI stock went public in August 2007. Since then, it has returned a staggering 6,326%, outpacing the broader markets by a wide margin. It means a $500 investment in MELI stock just after its IPO would be worth over $31,200 today. Comparatively, the S&P 500 (SPX) would have turned $500 into $2,386 after adjusting for dividends since August 2007. But does this mean it’s too late to buy MELI stock now?

While MercadoLibre will not be able to replicate its historical returns, I’m bullish on the stock due to its widening portfolio of solutions, earnings growth profile, and reasonable valuation.

An Overview of MercadoLibre

MercadoLibre is the largest online commerce ecosystem in Latin America based on the number of orders and unique visitors. A Brazil-based company, it has a presence in 17 other countries, including Mexico, Argentina, Columbia, Chile, and Peru. MercadoLibre is valued at $70.7 billion.

MercadoLibre operates an e-commerce platform similar to Amazon (NASDAQ:AMZN) and caters to a region with more than 650 million people. Its fintech platform, MercadoPago, offers a diverse range of fintech products, such as debit cards, online payments, credit lines, savings, insurance, and investments.

How Did MercadoLibre Perform in Q4 of 2023?

Despite a challenging macro environment, MercadoLibre reported revenue of $4.26 billion in Q4 of 2023, an increase of 42% year-over-year. In fact the company’s top line grew at the fastest pace since Q3 of 2022. Its adjusted net income stood at $572 million, indicating a healthy margin of 13.2%.

MercadoLibre reported gross merchandise volume (GMV) of $13.5 billion as growth in items sold rose to 29%, the highest in over two years. The e-commerce giant attributed its GMV growth to strong demand from Argentina, Brazil, and Mexico.

The expansion of its fulfillment network meant that MercadoLibre carried roughly 50% of its shipments in Q4 of 2023, a new record. It also delivered 122 million packages on the same or next day, an increase of 21% compared to the year-ago period.

In the Fintech business, MercadoLibre’s total payment volume, or TPV, touched $56.5 billion. It emphasized that off-platform TPV growth accelerated in key markets, growing by triple-digit rates. Moreover, it ended 2023 with a credit portfolio of $3.8 billion, up 33% year-over-year.

A Focus on Consumer Electronics and AI

MercadoLibre emphasized that the Consumer Electronics (CE) segment is its largest single online category in Latin America. To gain traction in this segment, it leverages technology to manage pricing, inventory, and supplier relationships. While MercadoLibre provides competitive offers in this category, it continues to grow margins in the Consumer Electronics vertical, allowing it to push harder for growth. For instance, during the Black Friday promotional campaign, the CE category grew by 140% year-over-year.

Additionally, MercadoLibre launched capabilities to enable sellers to create their own promotional coupons and answer buyers’ questions quickly due to its AI-powered platform. MercadoLibre also launched a new affiliates program and ramped up short-form videos to expand social media tools that drive traffic to seller listings.

Its widening capabilities meant that MercadoLibre shipped 650 million items in 2023, an increase of 45% year-over-year. Further, the e-commerce giant believes investments in its fulfillment infrastructure should improve the value proposition for buyers and sellers.

Online Ads Will be a Key Revenue Driver

Similar to Amazon, MercadoLibre is well positioned to drive top-line growth due to digital ad sales, which is a high-margin business. Currently, Amazon is the third-largest digital ad platform in the world, after Google (NASDAQ:GOOGL) and Meta Platforms (NASDAQ:META).

In 2023, MercadoLibre relaunched its ads tech stack. It launched an automated buying platform for display ads while providing live reports and other insights to advertisers. Its tech stack for ads also includes a feature for agencies to manage multiple brands on the platform.

Finally, the company launched Mercado Play, an ads-based streaming platform that operates on a revenue share model with studios. MercadoLibre is offering free content to users, as it unlocked a new revenue stream for the ads business.

What Is the Target Price for MELI Stock?

Out of the 12 analyst ratings given to MELI stock, 10 are Buys, two are Holds, and none are Sells, indicating a Strong Buy consensus rating. The average MELI stock price target is $1,935.45, indicating upside potential of 41.3% from current levels.

Wall Street expects MercadoLibre to increase its revenue from $14.47 billion in 2023 to $17.7 billion in 2024. Comparatively, adjusted earnings are forecast to expand from $19.46 per share in 2023 to $32.98 per share in 2024. So, priced at 41.5 times forward earnings, MELI stock might seem expensive, given that the sector median multiple is much lower at 14.9x. However, MELI is on track to grow the bottom line by 72.5% this year, so it deserves a premium valuation.

The Takeaway

MercadoLibre’s expanding portfolio of products enables the company to unlock additional revenue streams while contributing to earnings growth. Its broadening base of customers and robust ecosystem of online solutions position the firm to benefit from secular growth trends in the upcoming decade. Basically, MELI is a fast-growing large-cap stock that looks poised to beat the broader markets in 2024 and beyond.

Disclosure