Daniel Pronk on $MELI (Nov 5, 2026)

Mercado Libre's stock is currently down 12.4% after the company announced its earnings last night, and is now very close to its lowest level in 52 weeks.

Therefore, I think it's fair to say that the market wasn't very impressed with Mercado Libre's earnings results. However, if you have been following this stock for the past two years, this report is similar to reports that have been issued for the past year or so, in which Mercado Libre is clearly sacrificing short-term profit margins in order to grow the company’s revenue and increase its market share.

This is a company that is very comfortable sacrificing profit margins and short-term profits to reinvest in the growth of its business, and that is what it has done again. However, as we have seen in this earnings season, if you do not report outstanding results , your stock will take a significant hit.

which adds negative pressure on Mercado Libre's stock. However, I have increased my stake, and in today's video, I want to explain why, as a long-term shareholder, I still believe this business is cheap and does the right things that will increase shareholder value in the long run .

So, I think this video will be a little longer because I really want to delve into the earnings results and explain why I chose to buy more stocks today. Okay, let's start with the introduction to the shareholders' letter, where we can see that revenues increased by 45% and by 41% on a foreign exchange-neutral basis.

Operating income reached 676 million with a profit margin of 6.3 %. Profits amounted to 448 million with a profit margin of 4.2%. Then we can see that the total volume of payments was $109 billion in the quarter, up 53% year-on-year, and the total volume of goods was $23 billion, up 38% year-on-year.

So, the company continues to grow by nearly 40% across all metrics, but margins remain squeezed due to reinvestment in this growth.

Then, later in the shareholders' letter, Mercado Libre stated that Brazil, its largest market, was achieving the strongest results. This is important because it shows that Mercado Libre is winning in its most important and mature markets, and continues to expand very rapidly on a large scale.

Miele then shares that it has gained market share in each of its three major markets. The company's customers are shopping more frequently, and users of financial technology services are increasingly using "Mercado Pajo".

However, operating income fell by 6% year-on-year despite revenue growth of 45%. They then add that the level of interaction increases in depth across each scale. They are investing a portion of today's margins and profits to accelerate the transformation in trade and financial services, and it is working.

Continuing to read the shareholders' letter, they wrote: "Growth remains high in our largest markets, with buyers now making 12 purchases annually compared to 50 in developed markets."

This means that existing customers can still increase total merchandise volume and e-commerce revenue by about 4 times over time, even if MercadoLibre does not acquire any new customers, assuming that the Latin American market will eventually catch up with more advanced markets such as the United States.

They then share that fintech users are also conducting more transactions. With the total volume of payments per user increasing by 34 %. Again, this is on a per-user basis, and it is growing by 34%, which shows that users are using "Mercado Pajo" much more .

The number of users in the ecosystem grew by 33% year-on-year, faster than any other sector. These are users who shop through the e-commerce platform and use the financial technology platform together.

MercadoLibre says that users in the ecosystem generate 70% more total merchandise volume than store-only users, and achieve 90% more payment transaction volume than fintech-only users.

Ultimately, their average revenue per user is three to four times higher.

That is why it is crucial to encourage people to become users of both e-commerce and financial technology. It's great to see that this type of user is growing by 33%. It also illustrates how having both an e-commerce and fintech platform constitutes a competitive advantage that enhances every business.

Millie also shares that it obtains a huge amount of data from these users, which supports their advertising and credit business. They then shared this graph showing that their shipping costs are decreasing .

This means their e-commerce platforms and logistics services are becoming more efficient. That's why they offer free shipping to customers, because they are able to transfer more savings to them.

It's very good to see that, and it shows that their investments are also working as planned.

This slide is taken from their new investor presentation, and it shows that they continue to grow faster than the overall Latin American e-commerce market , meaning they continue to capture a larger market share.

The number of unique buyers also increased by 22% year-on-year to 93.9 million people. They have added 17 million buyers on an annual basis, and Brazil still represents the biggest gains here.

Once again, Brazil is their most mature market, and it is where they are experiencing the most growth.

However, the total volume of goods and merchandise sold in Mexico slowed significantly, from growth of 42% to 25%, and from 34% to 21%. But Brazil remains strong, and in fact, it is accelerating.

Meanwhile, Mexico is currently experiencing a decline. Overall, this has led to a slight year-on-year slowdown in their metrics, but growth remains very strong.

The number of items sold per unique active buyer increased by 12% to 9.2. In Brazil , they reported that this measure also grew by 16% year-on-year. This means that buyers are using "Mercado Libre" more, which is exactly what they are looking forward to seeing.

Returning to their letter to shareholders, they noted that advertising revenue grew by 51% year-on-year and 58% on an exchange rate-neutral basis, far exceeding market performance and meaning that Mercado Libre is capturing market share.

Although Argentina and Mexico experienced slower growth in advertising, business still grew by more than 50%. They then mentioned that their AI consultant now manages campaigns for 56,000 vendors, helping more companies adopt and manage their advertising.

Mercado Libre adds that it now holds 11% of digital advertising revenue in Latin America, up from just 2% in 2020 . Their digital advertising business is growing at four times the rate of the market as a whole, which explains how they have gained such a large market share .

As Mercado Libre explains, it is now the third largest digital advertising company in the region, having gained 3.1 percentage points of market share year-on-year, while its main competitors have lost market share.

This is very positive, as advertising is a very profitable activity for them.

Turning to financial technology services , they reported that they now have 93 million monthly active users, a 29% year-on-year increase.

Meli indicates that it is now the largest digital bank in Mexico in terms of the number of active users, with more than 18 million users in the country and an annual growth rate of 40%.

In Argentina, 80% of the population have become active users of "Mercado Pajo", which is truly amazing. In Brazil, Mercado Libre continues to grow its monthly active user base at a rate of 35% annually, faster than any other player in the country on a large scale.

They emphasize that the asset quality in their loan portfolio remains strong, with the ratio of non-performing loans (50-90 days) holding steady at 7 %, despite the weakness in the sector in Argentina and Brazil.

Therefore, Mercado Libre is experiencing non-performing loan losses at record low levels, while the market as a whole is suffering from high losses.

This is happening at a time when they have grown their credit portfolio by 62% year-on-year, which is incredible.

They also say that this card remains their biggest investment, and it is where the majority of profits are reinvested to continue growing their credit card portfolio and issuing more cards throughout the region .

Here you can see that the number of monthly active users in financial technology has once again reached 93 million users, an increase of 29% year-on-year. But the important point here is that growth is not slowing down widely, with Mercado Libre adding 5 million users to its financial technology services on a quarterly basis .

Assets under management rose by 67% year-on-year, and these are the people who are saving and investing more with Mercado Pago . Therefore, people are moving more of their assets to Milli's fintech platforms .

I mean, think about it. If the number of fintech users increases by 29% while assets under management increase by 67%, it means they are moving more of their assets to Millie on a per-user basis .

The loan portfolio also increased by 62% year-on-year, with credit cards continuing to make up a larger part of the portfolio , now representing 47% of the total loan book .

This puts pressure on margins in the near term, as Millie has to allocate provisions against loans upfront. Therefore, when loans grow faster than total revenues, this represents a constraint on margin.

However, overall, their net interest margin after losses remained stable quarter-on-quarter at 20.1%, but it is still lower than last year's 21%, and I don't think the market liked that.

Over time, I expect this metric to grow again, especially as newer credit card groups mature and do not invest heavily in growing their credit card portfolio.

The following screenshot shows us that non-performing loans with a maturity of between 50 and 90 days are still low at just 7%, which is good. However, non-performing loans with a maturity of more than 90 days are trending upwards to reach approximately 19.3%.

In the last quarter, Mercado Libre explained that this group is not an important measure and that it is more volatile. This is because if new credit growth slows , which it currently is in percentage terms, old non-performing loans will naturally grow as a percentage of the total loan book because there are not enough new loans to offset their impact.

So, if you have fewer new loans, old non-performing loans will make up a higher percentage. In general, short-term non-performing loans are the most important metric here, at least in my opinion.

Also, Millie has a provisioning ratio of over 100% for its non-performing loans, and provisioning rates of 140% for the 90-day category. This means that Mercado Libre has already allocated the necessary cash to absorb all these losses, and that these losses have already been written off.

I also prepare and update this chart every quarter with Mercado Libre. I have been following non-performing loans since they started reporting them in the fourth quarter of 2021.

You can see that non-performing loans with a maturity of 15 to 90 days are actually low and close to their historical lows, which is impressive, especially considering that their loan portfolio has grown by more than 60% year-on-year.

However, the 90-day category is trending upwards, which is something worth watching and paying attention to. But the new loans they are granting are still sound. Mercado Libre concludes its letter to shareholders by stating that Latin America has seen the fastest growth in e-commerce penetration since 2020, at twice the pace of 2019.

As more of the economy moves online, Mercado Libre's goal is to ensure that more of it passes through its ecosystem . And I agree with that.

Growth remains strong, participation is deepening, the cost of service is falling, and they say margins will improve in the future as investments begin to mature. However , the structural drivers of profitability – lower shipping costs, operating leverage, and credit portfolio profitability – are all improving, meaning the company’s overall underlying earnings are actually rising.

They are simply reinvesting those profits to continue to achieve further growth and improve the business. As a long-term shareholder, this is what I want them to do.

Moving on, this screenshot shows us a table of all their different businesses and economies and their annual growth rates in US dollars. You can see that Brazil has accelerated to revenue growth of 50% year-on-year.

Mexico also accelerated to 47%, but Argentina slowed to 27%. Overall, trade accelerated to 47%, and financial technology slowed to 42%, but both are still growing strongly, and overall Mercado Libre accelerated to 45% year-on-year growth.

The total volume of goods also accelerated to 38%, and the total volume of payments also accelerated across the board.

I think this indicates that their investments are paying off because almost every business in every economy is still accelerating even as the scale expands. Okay, now we'll take a quick look at some of the charts from "Stock Unlocked ".

Here we can see that the number of monthly active users in financial technology continues to grow strongly and reaches new record levels . This number also grew by 5 million on a quarterly basis.

The total volume of goods continued to grow well and reached new record levels.

Mercado Libre also shared that its operating capacity grew by 20% in this quarter alone, ahead of the peak holiday season. Therefore, I think the fourth quarter could be very strong with this new operational capacity coming into effect.

The total number of items sold also continues to grow, and the same applies here. I think the fourth quarter will be very good for Mercado Libre's business with this metric.

Mercado Libre recorded $109 billion in total payment volume, a new record that continues to grow. As we have seen, users are increasingly using Mercado Pago for their purchases.

Same-day and next-day shipments continue to set new record levels, and you can see that this metric is accelerating and expanding rapidly. This demonstrates that their investments in logistics are paying off and deepening their competitive advantage, because there aren't many companies in Latin America that can ship on the same day or the next day.

Mercado Libre's credit portfolio also continues to expand rapidly. As I said before, this is where much of the company's profits are reinvested . Their credit portfolio currently stands at $18 billion.

Mercado Libre's fintech revenues have also risen to $17 billion in the past twelve months , making it roughly the size of Nubank. I mean, think about that. Mercado Libre essentially owns the entire Nubank entity within its own business.

Then it also has an e-commerce platform and an advertising platform. However, this is still an impressive growth in the field of financial technology.

Finally, we can see here that revenues in Brazil are also accelerating and have grown by 50% year-on-year, despite it being Mercado Libre's largest market and generating $20 billion in revenue in the past twelve months.

In my opinion, this illustrates how huge the opportunity is in Latin America, because Mercado Libre's largest market is still expanding and growing at a rate of 50%. This indicates that Mexico still has a long way to go. Mercado Libre is still in its early stages.

Now, I also read the conference call and this is the main point I want to make because one of the big concerns about Mercado Libre recently has been the political scene in Brazil.

In the conference call, they mentioned how Mercado Libre has been operating in Brazil for 27 years under different governments. The opportunities for e-commerce, financial technology, and the digitization of the entire economy are stronger than any political leader.

They believe that they will continue to grow and that this is literally not a factor affecting their business.

Now, as always, I like to provide a summary of my videos using a summary slide. So, here's what I have to say about profits in general . Mercado Libre continues to grow by more than 40% year-on-year even when excluding the effects of exchange rates.

The number of users is increasing in both e-commerce and financial technology platforms. Furthermore, transactions and savings per user are constantly growing. The number of items purchased by each user is also increasing.

Shipping costs are decreasing , while the cost of service in the financial technology sector remains at one dollar per user. Interaction and usage deepen across the Mercado Libre system while the cost of the service actually decreases.

This means the company is achieving operational leverage. You simply cannot see it in the published metrics because they are heavily reinvesting in the business.

Mercado Libre also increased its shipping capacity by 20% this quarter just before the holiday season, which I think could make the fourth quarter very strong, especially for their e-commerce business.

Growth is also accelerating in Brazil at a rate of 50%, even though it is the largest market for Mercado Libre. Mercado Libre also has the largest digital bank in Mexico, and it is still very early days in that market.

There are literally decades of compound growth left here.

Non-performing loans remain in a healthy position despite the weak macroeconomy in key markets and competitors seeing high losses. The advertising continues to gain market share and grow by more than 50% despite headwinds in Mexico and Argentina, and is a very profitable business for Mercado Libre.

The political scene is just short- term noise and does not affect the work or its thesis in the long term. They have grown under multiple leaders, and this is the same leader who has just been re-elected .

Therefore, I believe that the recent sell-offs of

However, Mercado Libre continues to sacrifice its profit margins today to capture growth and market share and deepen its competitive trench. I believe that underlying earnings and workforce strength are growing and strengthening, but the price is moving in the wrong direction.

Ultimately, I think this makes Mercado Libre stock look more attractive as a long-term investment to me, and I bought more shares in the market today after the sell-off.

Overall, I still believe the market is focused on the short-term profits and margins of this business. But I truly believe that Mercado Libre investors should think long-term, and I'm talking about 5, 10, 15 and 20 years, because I sincerely want to keep this business for decades to come; I believe that the opportunity in Latin America, as its economy continues to be digitized, is enormous.

Mercado Libre appears to be a leader in these new industries. They are bringing a lot of people into the digital world and I think this will continue. Even in its largest market, Brazil, their revenues are still growing by 50% year-on-year.

This means there is still a lot of cumulative growth and room to continue expanding, even in Brazil. Because if they started to oversaturate the market, we would see revenues begin to slow down, but they are still accelerating in this upward direction.

Ultimately, I believe that Mexico will be another huge market for Mercado Libre and will follow the same steps that took place in Brazil. What worries the market and makes it uncomfortable, well, the main thing is, there are a few things, but the most important is that you are not seeing profits today.

Analysts want to know when earnings and profit margins will start expanding again . Because, quite simply, on an annual basis, Mercado Libre's operating income is now declining.

This puts people and analysts in an uncomfortable position because you really have to believe that the investments they are putting into the business are growing core earnings and creating value for shareholders in the long run.

Mercado Libre is in the opposite situation. Well, it is actually still in the same position as cloud computing companies , but the market does not see it that way because Mercado Libre is very willing to sacrifice its profit margins today to continue investing in the growth of its business.

So, as a shareholder, I ask myself: Do I believe that these investments are paying off? The fact that their business is still accelerating, even though it now generates nearly 40 billion in annual revenue and is still growing by more than 40% annually, I think is a clear argument that their investments are paying off and that they are able to increase their revenue.

Furthermore, their user base is growing. They continue to attract more users of financial technologies. They are attracting more e-commerce users. Then their interaction also deepens.

Financial technology users are using their platforms more, buyers are buying through the platform more, and their service costs are decreasing, which means their businesses are becoming more efficient over time.

Then their interaction also deepens. Then they take those profits and invest them in the product and development. They actually spent slightly more on sales and marketing this quarter.

They also use a great deal of their operational leverage to continue growing the credit portfolio, because growing this portfolio is ultimately what drives people to buy through the e-commerce platform and makes them more involved in the Mercado Libre system.

They recently stated that if you can attract a user to their credit card, they start shopping more, they start using the fintech platform more, they start getting more data, and the ads get better.

So, the credit card is like a gateway, you know what I mean, a gateway to the business of " Mercado Libre". That's why they invest in it so heavily.

In addition, their loan portfolio losses remain at or near all-time lows , while the economies in which they operate are struggling and facing headwinds, indicating that their credit rating is very good.

So, when I put it all together, I think Mercado Libre's investments are already paying off, and that the company continues to grow its core earnings. As I mentioned earlier, Mercado Libre essentially has a new bank inside it.

New Bank currently enjoys profit margins of around 20%. It's making about $4 billion in profits annually now, okay? Therefore, if Mercado Libre's fintech service costs are in line with NeoBank's and they are generating roughly the same amount of revenue as NeoBank, then Mercado Libre's fintech business profit margins are likely around 20% as well.

In reality, they are just reinvesting the profits in it, right? But this business is likely generating around $4 billion in annual profits at the moment.

The advertising business has generated $2.2 billion in revenue over the past twelve months and reportedly has an operating margin of 80%. Therefore, an operating margin of 80% could likely turn into a net margin of 50%, meaning that the advertising business is also generating $1 billion in profits.

This means that overall business activity through financial technology and advertising is currently generating approximately $5 billion in cash flow. Then, in addition, they have their own huge e-commerce platform .

Honestly, I don't think an e-commerce platform is very profitable with high profit margins. So, if you applied a 5% profit margin to the e-commerce platform, you would get about $1 billion in annual profits , which is a very low margin for any e-commerce platform .

This means that Mercado Libre, based solely on this, has generated approximately $6 billion in profits currently on a twelve-month basis. With a market capitalization of $76 billion, that means it's trading at what? 13 times the potential profits?

You won't see the profits today, and they simply won't exist because they take those profits and reinvest them. But in the long run , they want to improve the company's free cash flow just as much as Amazon does.

I don't care that Mercado Libre's stock fell by 12% today. It was, well, before today I think it represented about 8% of my investment portfolio if I remember correctly. I don't care.

I don't care that it dropped by 12% today. I bought more shares today.

Short-term fluctuations don't really matter when you think long-term, because when I look at this stock in 2031, that is, 5 years from now, I strongly believe it will not be at $1,500.

I believe the company's revenue will be several times higher . I think it will continue to grow by more than 20 % annually. There is no way the stock will stay at $1500. I think that in the long run, especially once they decide to improve margins and slow down investments, profits will explode.

The problem is that the market is so focused on the short term that if earnings aren't exploding right now, your stock is going to take a sharp downturn, especially with current trends and the way the market is operating today.

Therefore, I am not at all surprised by the stock's decline .

But as a long-term investor who believes that this company’s competitive advantage is increasing and that its core profitability is also increasing, I think it is very cheap from a long-term perspective.

This does not mean that I believe the stock will rise next month. This does not mean that I believe it will rise in 3 months, 6 months, or even next year. I have absolutely no idea about that.

But when I think about the position that Mercado Libre will reach in 5 to 10 years, it will be enormous. Good. It will be enormous. This company has many supporting factors and is doing a great job.

When I look at Mercado Libre in the long term, I think there is a tremendous amount of value in its market value and valuation today.