MercadoLibre, Inc.

Analyst thesis

Our recommendation is based on:

• MercadoLibre boasts a compelling earnings growth outlook, propelled by multiple drivers:

  o Latin America’s underpenetrated e-commerce market.

  o Artificial intelligence (AI)-enhanced search for more personalised product recommendations within categories.

  o MELI+ growth as a lock into the ecosystem via benefits such as subsidised shipping, content bundling and cashback.

  o Expansion of first-party offerings (currently 6% of gross merchandise volumes (GMV)), with competitive pricing and quality in some product categories.

  o A focus on rapid growth in GMV, total payment volumes (TPV) and take rates.

  o Fintech acceleration in Latin America through the integrated platform, credit book growth, and neobank development.

  o Earnings growth as the primary driver of long-term share price performance.

• We anticipate an uplift in valuation multiples in the future, as current investments bolster its moat and margins ahead.

• We also forecast that the continued multiple contraction should bottom out, with the company growing into its valuation. The absolute levels are approaching normalised levels when compared to retail peers like Amazon.