Fierce Stripe And PayPal Competition Will Weaken Latin America Prospects

Key Takeaways

• Intensifying competition and market saturation will slow revenue growth and make margin expansion increasingly difficult across both e-commerce and fintech sectors.
  
• Macroeconomic volatility, currency headwinds, and rising compliance and logistics costs will compress profitability and add persistent operational challenges.
  
• MercadoLibre's integrated e-commerce and fintech model, operational efficiencies, and deepening ecosystem position it for sustained, profitable growth in Latin America's expanding digital economy.

Catalysts

Operates online commerce platforms in Brazil, Mexico, Argentina, and internationally.

• The rapid expansion of global and regional competitors such as Stripe, Adyen, PayPal, and new entrants like TikTok Shop and Temu is likely to erode MercadoLibre's market share in both e-commerce and fintech, leading to slower revenue growth as competitive pricing and increased marketing spends intensify across Latin America.
  
• Ongoing macroeconomic instability and persistent currency devaluation in core markets like Argentina and Brazil will continuously erode consumer purchasing power and generate sustained foreign exchange headwinds, directly impacting reported revenues in US dollars and compressing earnings growth.
  
• Escalating cost pressures from required logistics investments and fulfillment network expansion in Brazil and Mexico, necessary to maintain delivery speeds and service competitiveness, are likely to result in capital expenditures and operational spending rising faster than revenue growth, severely limiting margin expansion and weighing on net margins over time.
  
• Heightened regulatory scrutiny, including evolving digital taxation regimes and stricter data privacy laws across Latin America, will increase compliance costs and operational complexity for cross-border trade and digital financial services, leading to ongoing structural margin pressure and volatility in earnings.
  
• As e-commerce adoption rates, particularly in fast-moving consumer goods and general retail, approach levels closer to market saturation, the opportunity for sustained high double-digit growth will fade, resulting in materially lower revenue growth rates and ultimately diminishing operating leverage at scale.

MercadoLibre Future Earnings and Revenue Growth

Assumptions

• This narrative explores a more pessimistic perspective on MercadoLibre compared to the consensus, based on a Fair Value that aligns with the bearish cohort of analysts.
• The bearish analysts are assuming MercadoLibre's revenue will grow by 20.6% annually over the next 3 years.
• The bearish analysts assume that profit margins will increase from 9.2% today to 10.8% in 3 years time.
• The bearish analysts expect earnings to reach $4.3 billion (and earnings per share of $84.08) by about July 2028, up from $2.1 billion today. The analysts are largely in agreement about this estimate.
• In order for the above numbers to justify the price target of the more bearish analyst cohort, the company would need to trade at a PE ratio of 33.3x on those 2028 earnings, down from 59.2x today. This future PE is greater than the current PE for the US Multiline Retail industry at 16.1x.
• Analysts expect the number of shares outstanding to remain consistent over the next 3 years.
• To value all of this in today's terms, we will use a discount rate of 10.49%, as per the Simply Wall St company report.

MercadoLibre Future Earnings Per Share Growth

Risks

• MercadoLibre is demonstrating rapid user and GMV growth in both e-commerce and fintech, especially with monthly active fintech users growing over 30% year-on-year and credit portfolios scaling profitably, which can drive continued revenue and net earnings expansion.
  
• The company’s ability to spread fixed logistics and technology costs over accelerated top-line growth is supporting operating margin improvement, as seen in Argentina where operational efficiencies and cost dilution contributed to an 11 percentage point increase in consolidated profitability.
  
• Strategic investments in logistics, credit products, and ecosystem integration have allowed MercadoLibre to consistently outpace competitors in major markets and deepen cross-selling opportunities, enhancing customer retention and the average revenue per user, positioning the company for long-term profit growth.
  
• Enhanced monetization across fintech, including the expansion of credit, insurance, high-yield deposit accounts, and investments, is driving higher fee-based and interest income, which is already visible in improved asset under management and low delinquency rates—supporting both revenue and net margin growth.
  
• The ongoing secular shift in Latin America towards digital commerce and financial services remains robust, with low e-commerce and fintech penetration rates across key categories (such as supermarkets and fast-moving consumer goods), leaving ample room for MercadoLibre to capture additional market share and sustain high growth rates in both revenue and net income over the long term.

Valuation

• The assumed bearish price target for MercadoLibre is $2105.75, which represents two standard deviations below the consensus price target of $2772.21. This valuation is based on what can be assumed as the expectations of MercadoLibre's future earnings growth, profit margins and other risk factors from analysts on the more bearish end of the spectrum.
• However, there is a degree of disagreement amongst analysts, with the most bullish reporting a price target of $3200.0, and the most bearish reporting a price target of just $1868.21.
• In order for you to agree with the bearish analysts, you'd need to believe that by 2028, revenues will be $39.3 billion, earnings will come to $4.3 billion, and it would be trading on a PE ratio of 33.3x, assuming you use a discount rate of 10.5%.
• Given the current share price of $2405.15, the bearish analyst price target of $2105.75 is 14.2% lower. Despite analysts expecting the underlying buisness to improve, they seem to believe the market's expectations are too high.
• We always encourage you to reach your own conclusions though. So sense check these analyst numbers against your own assumptions and expectations based on your understanding of the business and what you believe is probable.