MercadoLibre's Logistics Efficiency Claims Face Scrutiny Amid Persistent Margin Pressures

What happened

A recent Zacks article suggests MercadoLibre's logistics operations are shifting from a cost drag to a margin driver through scale, robotics, and faster shipping. However, the DeepValue report reveals that logistics, especially in Brazil, has been a major margin pressure, with direct contribution margin falling to 11.8% in Q3'25 from 17.3% YoY due to aggressive free-shipping subsidies and higher costs. While the report notes some unit shipping-cost declines (e.g., Brazil down 8% QoQ), overall margin compression persists, and heavy reinvestment in logistics continues to strain operating leverage. The report critically emphasizes that proof of margin stabilization, not just efficiency claims, is essential, with Q4'25 results serving as a key litmus test. Thus, investors should treat the logistics tailwind narrative skeptically until concrete financial improvements are demonstrated in upcoming earnings.

Implication

The Zacks article's optimism about logistics as a margin driver could signal a positive inflection if supported by data, potentially easing concerns over Brazil's contribution margin. However, given the DeepValue report's documentation of persistent margin pressure from shipping subsidies and reinvestment, any optimism must be tempered until Q4'25 and Q1'26 results confirm stabilization. Failure to show improvement in Brazil direct contribution margin or credit quality (e.g., 15-90 day NPL rising above 6.8%) could reinforce the bear case and lead to downside risk toward the $1,500 implied value. Conversely, if logistics efficiencies materialize and support margin recovery, it could validate the bull scenario and align with the POTENTIAL BUY rating's base case of $2,300. Investors should maintain a cautious, data-driven stance, focusing on disclosed metrics like Ads penetration, NPL ratios, and logistics cost trends rather than speculative narratives.

Thesis delta

The core thesis—that MELI must prove margin stabilization and credit quality to justify its valuation—remains unchanged, as the news does not provide new financial evidence. However, if logistics efficiencies are confirmed in upcoming results, it could support the margin recovery needed for upside, but until then, the thesis does not shift. Investors should await Q4'25 and Q1'26 prints before adjusting their views, as the report's key risks around Brazil margins and credit scaling still dominate.