MercadoLibre's Bullish 2026 Forecast Confronts DeepValue's Margin and Credit Concerns

What happened

A Seeking Alpha article published on January 26, 2026, recommends buying MercadoLibre, highlighting robust 40% Q3 revenue growth and anticipating EPS acceleration in FY 2026 despite recent misses due to investment and FX losses. However, the DeepValue master report reveals that operating margin has compressed from 13.5% in Q4 2024 to 9.8% in Q3 2025, driven by aggressive Brazil free-shipping subsidies to counter competitors like Shopee and Temu. The report also notes a sharp decline in Net Interest Margin After Losses (NIMAL) from 31.1% to 21% as the credit book expanded rapidly to $11 billion, increasing balance-sheet risk. Management's continued prioritization of long-term growth over near-term profitability has led to margin pressure and EPS shortfalls, which the bullish article downplays. With the stock trading at $2,233 and a P/E of 54.5, DeepValue argues that the price already embeds optimistic assumptions about margin recovery, making the risk-reward unfavorable without evidence of stabilization.

Implication

The Seeking Alpha article's optimistic tone masks the significant margin compression and credit risks detailed in SEC filings, which threaten MELI's profitability and justify DeepValue's 'WAIT' rating. At current valuations, the stock assumes a swift rebound to mid-teens operating margins, but persistent Brazil subsidies and declining NIMAL could derail this, leading to downside toward the bear case of $1,500. Investors must monitor upcoming earnings for signs of EBIT margin stabilizing above 10% and NIMAL holding steady, as these are critical to validating the growth narrative. DeepValue's base case of $2,300 implies limited upside from here, emphasizing the need for patience rather than chasing the bullish sentiment. Entry opportunities may arise if competitive pressures ease or credit metrics improve, but until then, the lack of margin of safety warrants a disciplined approach.

Thesis delta

The new article does not shift the core thesis from the DeepValue report, which remains 'WAIT' due to unresolved margin and credit risks. It reinforces the market's bullish narrative but overlooks the underlying financial deterioration, highlighting a disconnect between sentiment and fundamentals. Investors should view this as a reminder to adhere to DeepValue's framework, waiting for either a price correction or evidence of operational stabilization before considering exposure.