MercadoLibre stock sits 26% below its 52-week high after three straight quarters of profit declines
MercadoLibre (NASDAQ: MELI) recently closed above $1,950, roughly 26% below its 52-week high, even as the company crossed $10 billion in quarterly revenue for the first time and extended a streak of 30 consecutive quarters of at least 30% revenue growth. Each of the most recent earnings releases drew a selloff: shares fell 12.7% after May results and dropped as much as 9% after the August report before settling about 4.5% lower. Operating margin compressed to 6.7% from 12.2% a year earlier, and profit declined for a third straight quarter.
Key takeaways
- MercadoLibre (NASDAQ: MELI) recently closed above $1,950, roughly 26% below its 52-week high.
- The company crossed $10 billion in quarterly revenue for the first time and extended a streak of 30 consecutive quarters of at least 30% revenue growth.
- Operating margin compressed to 6.7% from 12.2% a year earlier, and profit declined for a third straight quarter.
- About two-thirds of the margin compression traces to a provisioning effect, as the credit book grew 87% year over year and costs are recorded before the associated revenue arrives.
- CFO Martin de los Santos said the company is not optimizing for short-term margin and will keep investing boldly in growth initiatives.
MercadoLibre (NASDAQ: MELI) recently closed above $1,950, roughly 26% below its 52-week high, even as the company crossed $10 billion in quarterly revenue for the first time and extended a streak of 30 consecutive quarters of at least 30% revenue growth. Each of the most recent earnings releases drew a selloff: shares fell 12.7% after May results and dropped as much as 9% after the August report before settling about 4.5% lower. Operating margin compressed to 6.7% from 12.2% a year earlier, and profit declined for a third straight quarter.
The company attributed the margin move to deliberate investment rather than deteriorating economics. CFO Martin de los Santos told analysts the company was choosing not to slow spending to protect near-term margins. "We are not optimizing for short-term margin," he said. "We will continue to invest boldly in those initiatives." Spending targets include free and fast shipping in Brazil, where MercadoLibre lowered the free shipping threshold, expansion of the Mercado Pago credit card, first-party inventory selection, cross-border trade, and user acquisition in Mexico.
Credit provisioning and the margin gap
Two-thirds of the margin compression traces to a provisioning effect. MercadoLibre's credit book grew 87% year over year, faster than revenue. Because the company provisions for the full expected loss on a loan at issuance, a faster-growing loan book records costs before the associated revenue arrives. The company added roughly 84 million active buyers and 82 million fintech users, the release shows.
Mercado Pago, which started as a marketplace payment tool, now handles digital wallets, QR code payments, and credit services, including accounts for customers without traditional banking access. Mercado Envios manages warehousing, shipping, and last-mile delivery through distribution hubs across Latin America.
The forward enterprise value to revenue ratio fell from 3.8 in March 2025 to 2.1, and the enterprise value to EBITDA ratio moved from around 23.7 to 21.4. Revenue grew 50%. The credit book grew 87% year over year.