MercadoLibre Stock (MELI) Strong Growth and Good Value in Q3 2025

MercadoLibre (NASDAQ:MELI) continues to stand out as one of Latin America’s premier technology-growth stories. With its dual focus on e-commerce and fintech, it has delivered another quarter of impressive top-line growth, even as margin pressures and macro-risks linger. In this article we will dive into MercadoLibre recent earnings, stock performance & valuation, growth potential, and the risks investor should consider.

About MercadoLibre

Founded in 1999 by Marcos Galperin in Argentina, MercadoLibre is often called the “Amazon of Latin America.” It operates leading e-commerce and fintech platforms across Brazil, Mexico, Argentina, Colombia, and more. Through MercadoLibre Marketplace, Mercado Pago, Mercado Crédito, Mercado Envíos, and Mercado Ads, the company drives growth by integrating online retail, payments, and logistics, leveraging Latin America’s accelerating digital commerce and financial inclusion trends.

MercadoLibre Financial Performance

In its Q3 2025 report, MercadoLibre continued to demonstrate strong financial momentum. Revenue for the quarter reached $7.4 billion, up 39.48% from $5.31 billion in Q3 2024, while EPS rose 6.06% to $8.30 from $7.83 a year earlier. On a trailing twelve-month (TTM) basis, revenue climbed 36.94% to $26.19 billion, and EPS surged 45.68% to $40.97. Free cash flow per share (TTM) also strengthened, increasing 40.76% to $169.83 from $120.66 in the prior year. The company maintained solid profitability metrics, with a gross profit margin of 50.36%, net profit margin of 7.93%, and free cash flow margin of 32.87%. Efficiency ratios remained impressive, as return on assets stood at 6.6% and return on equity reached 40.65%, supported by a moderate debt-to-equity ratio of 1.59.

Over the past five years, Mercado Libre has grown its revenue at a 48.7% CAGR, free cash flow at 59.6%, and net income has also increased rapidly. Mercado Libre has proven to be a fast-growing company in the past and is still projected to grow rapidly in the future.

MercadoLibre Fiscal 2025 Financial Forecast

Looking ahead, analysts forecast 2025 revenue of $28.33 billion, representing a 36.35% increase from 2024’s $20.78 billion, and expect non-GAAP EPS of $40.97, up 8.71% year over year. Reflecting confidence in MercadoLibre’s growth trajectory, analysts have issued a Strong Buy rating with a price target of $2,868.42 an implied potential upside of 23.25% and the highest estimate of $3,500, suggesting potential gains of up to 40.76%.

MELI Stock Price Performance and Valuation

At the time this article was written the stock was trading at $2,327.26 per share, MercadoLibre’s stock has risen 14.2% over the past year, slightly underperforming the S&P 500’s 19.9% gain during the same period. Over the last five years, the stock is up 56.6%, compared to the S&P 500’s 94.7% increase. While this relative underperformance may seem discouraging, it has also helped bring the company’s valuation to more attractive levels compared to the past. 

MercadoLibre now trades at a price-to-sales (TTM) ratio of 4.5, a forward price-to-sales of 4.16, a non-GAAP P/E (TTM) of 56.79, a forward P/E of 56.8, and a notably low price-to-free-cash-flow (TTM) ratio of 13.7.

Based on Fiscal.ai data, if we look at the valuation since 2022, the forward P/S, forward P/E, and P/FCF ratios are all below the average. This indicates a potential undervaluation, especially since Mercado Libre’s financial performance is still projected to grow rapidly in the coming years.

MercadoLibre Growth Potential

MercadoLibre growth potential remains strong driven by several factors

• Brazil's Accelerated Commerce Growth Driven by Free Shipping Strategy
  MercadoLibre’s reduction of Brazil's free shipping minimum purchase from 79 reais to 19 reais has revolutionized its commerce results, driving the highest growth levels since early 2021. In Q3 2025, items sold grew by 42% year-over-year, with unique buyers increasing 29%, marking the largest quarterly customer addition in company history. Foreign exchange-neutral gross merchandise volume expanded 34%, while conversion rates, purchase frequency, and customer retention all hit record highs.
  This strategy targeted lower-priced products where rivals like Shopee had gained ground, attracting more merchants who responded with a 10% increase in headcount and a 200% surge in new product listings. The program’s success forms a virtuous cycle: lower shipping costs boost transactions, merchant participation, and customer loyalty, making Brazil a key sustainable growth driver through 2026. This investment builds a strong competitive edge amid intensified market rivalry.
• Mercado Pago's Explosive Fintech Expansion with Financial Inclusion Focus
  Mercado Pago has rapidly become a dominant force in Latin America’s financial services scene, boasting 72 million monthly active users with 29% year-over-year growth. Its credit portfolio surged 83% to $11.02 billion, driven mainly by credit card offerings doubling to $4.8 billion, now representing nearly half of all credit extended. Assets under management jumped 89% to $15.1 billion, reflecting strong deposit growth from consumers seeking digital banking alternatives.
  In August 2025, Mercado Pago launched its credit card in Argentina, targeting a large untapped market where 60% of adults lack credit cards but rely on Mercado Pago for payments offering significant growth potential. Credit metrics remain strong with stable non-performing loan ratios and improving defaults. As e-commerce penetration remains low in the region, Mercado Pago’s integrated ecosystem allows it to grow transaction fees and high-margin financial service revenues, positioning it as a leading digital bank in Latin America.
• Record Advertising Revenue Growth Creating a Third Revenue Pillar
  Mercado Ads has surpassed $1 billion in annual revenue, showcasing growth rates surpassing MercadoLibre’s core commerce segment. In Q3 2025, advertising revenue grew 56% year-over-year (63% FX-neutral), outpacing the company’s overall 39% revenue rise. Display and Video ad formats nearly doubled, fueled by AI-powered GenAds tools that help small and medium sellers create quality ads. Integration with Google Ad Manager expanded ad reach beyond Mercado Libre’s ecosystem, allowing campaign management across multiple platforms.
  MercadoLibre leverages first-party data for precise brand campaign attribution, giving Mercado Ads a competitive edge over Amazon and Shopee, which lack such data richness. Partnerships with Roku and HBO have broadened premium ad inventory, enhancing demand-side opportunities. Digital advertising penetration in Latin America remains low, providing vast growth space as more regional brands shift marketing spend to Mercado Ads, positioning it as Latin America’s leading digital media platform.

Risks to Consider

While MercadoLibre stock looks compelling we should be mindful of potential risks.

• Increasing Credit Risk and Margin Pressure
  MercadoLibre's fintech lending portfolio has been growing rapidly, with credit volume surging 91% year-over-year, including a 118% rise in credit card usage. This rapid credit growth is straining margins, with net interest margins declining due to higher provisioning costs and elevated loan delinquencies (overdue loans >90 days at 18.5%). Expanding credit exposure could further pressure operating margins and profitability if asset quality does not improve.
• Macroeconomic and Inflationary Challenges
  High inflation in MercadoLibre's key Latin American markets like Brazil, Mexico, and Argentina is driving up operational costs such as labor, transportation, and credit funding. Inflation pressures result in higher shipping subsidies and wage expenses, complicating margin recovery. These cost increases challenge MercadoLibre’s expansion efforts and profitability, making operational efficiency and cost management critical amid persistent economic volatility in the region.
• Intense Industry Competition
  MercadoLibre faces fierce competition in e-commerce and fintech from regional and global players like Shopee, Temu, and Nubank. Shopee aggressively targets both commerce and fintech with low prices and marketing, posing a strong challenge. Nubank is a major fintech rival expanding in deposits and lending. To compete, MercadoLibre must continuously innovate, invest heavily in marketing, and maintain competitive pricing, which can strain growth and margins.

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Conclusion

Mercado Libre continues to prove its strength as Latin America’s leading e-commerce and fintech powerhouse. Its Q3 2025 results highlight impressive revenue growth, strong profitability, and healthy cash flow generation. Despite moderate stock underperformance, the company’s valuation remains attractive given its growth potential and solid financial metrics. With expanding digital adoption across the region and multiple business levers driving future earnings, Mercado Libre stands out as a compelling long-term investment opportunity for growth-focused investors.