MercadoLibre's Strong Growth Masks Persistent Risks Amid Fintech Expansion

What happened

A recent Motley Fool article highlights MercadoLibre's 49% currency-neutral revenue growth last quarter and its deepening financial services expansion as reasons for long-term optimism. However, the latest DeepValue master report confirms this growth but cautions that it comes with increased credit provisions and funding costs, as seen in the 9M25 filings. The report notes that while MercadoLibre's integrated ecosystem provides a durable moat, it faces significant headwinds from regulatory scrutiny, competitive pressures, and macroeconomic volatility in Latin America. Despite a DCF valuation suggesting substantial upside, the stock's high multiples and modest 12-month gain reflect investor caution over these risks. Therefore, while the growth narrative is compelling, investors must look beyond the surface to assess the sustainability of profitability amid rising risks.

Implication

The strong revenue growth underscores MercadoLibre's execution in expanding its fintech services, but investors must monitor credit quality in Mercado Crédito closely. Regulatory developments in key markets like Brazil and Mexico could impact fintech economics, requiring ongoing scrutiny. High valuation multiples (P/E ~52x) leave little room for error, making risk management crucial. For long-term holders, the potential upside from DCF models is attractive, but position size should account for LatAm volatility. Actions include tracking provisions vs. loan growth, regulatory news, and competitive moves to validate the investment thesis.

Thesis delta

The new article reinforces the growth aspect of the thesis but does not alter the core risks identified in the DeepValue report. The thesis remains a 'POTENTIAL BUY' with emphasis on monitoring credit and regulatory factors; no shift is warranted based on this promotional content.