MELI: Fixed Cost Leverage Will Drive 2026 Margin Expansion Amid Intensifying Competition

Analysts have nudged our MercadoLibre fair value estimate slightly lower to approximately $2,847 from about $2,862, reflecting modest target price trims tied to rising competitive pressure and recent earnings estimate cuts, partially offset by continued confidence in the company’s long term growth and margin levers.

Analyst Commentary

Street research on MercadoLibre has recently tilted mixed, with modest price target revisions reflecting a balance between confidence in the company’s long term growth runway and caution around near term competitive and macro headwinds. While opinion is divided on the magnitude and timing of upside, most analysts acknowledge that execution in both e commerce and fintech will be key to sustaining premium valuation levels.

Bullish Takeaways

• Bullish analysts highlight MercadoLibre’s ability to sustain robust top line growth in both marketplace and fintech, supporting the view that the company can grow into its premium multiple over the next several years.
• Some see Argentina de risking following the recent elections as a structural positive, arguing that a more stable macro backdrop could reduce earnings volatility and justify higher valuation support.
• Recent commentary underscores confidence in 2026 earnings power, with expectations that investments in logistics, payments and credit will drive share gains and operating leverage once current spending normalizes.
• Positive revisions to price targets from select firms, even if incremental, suggest that the market may be underestimating the durability of MercadoLibre’s competitive moat and margin expansion potential over the medium term.

Bearish Takeaways

• Bearish analysts point to rising competitive intensity in Brazilian e commerce as a key risk, warning that increased promotional activity could pressure take rates and gross margins, limiting near term upside to earnings.
• Several notes cite recent income and earnings estimate cuts as a reason for trimming price targets, arguing that consensus may still be too optimistic given the more challenging operating environment.
• There is concern that margin compression, driven by first party mix shift, free shipping initiatives and lower third party take rates, may persist longer than expected, delaying the realization of operating leverage.
• More cautious views emphasize that, despite the long term growth story, the current valuation already embeds ambitious execution assumptions, leaving limited room for disappointment on growth or profitability metrics.

What's in the News

• Amazon made an initial $25 million convertible note investment in Colombian delivery platform Rappi, gaining access to its logistics network and potentially intensifying competitive pressure on MercadoLibre across Latin America (Bloomberg).
• MercadoLibre released a new video episode of its Inside MercadoLibre podcast on Spotify and YouTube. The episode highlights tools for sellers to build stores, run promotions, engage on social media and leverage Mercado Ads to increase visibility.
• Previous Inside MercadoLibre podcast episodes have featured senior executives discussing strategy, culture, payments acquiring, advertising, logistics and artificial intelligence. These episodes underscore management’s focus on transparency and education for investors and merchants.

Valuation Changes

• The fair value estimate edged down slightly to approximately $2,847 from about $2,862, reflecting minor model adjustments.
• The discount rate rose marginally to about 10.94% from roughly 10.92%, implying a slightly higher required return.
• The revenue growth assumption increased modestly to around 24.6% from about 24.5%, signaling a small uplift in long term growth expectations.
• The net profit margin ticked up slightly to roughly 10.12% from about 10.11%, indicating a minor improvement in long term profitability assumptions.
• The future P/E multiple eased slightly to about 37.9x from roughly 38.2x, suggesting a marginally lower valuation multiple applied to forward earnings.