📦 Unpacked #3: MercadoLibre

Our In-Depth Fundamental Analysis & Final Score of MercadoLibre ⭐

Welcome to another edition of Unpacked, our monthly series where we explore a different company in detail. Each month, we break down its story, business model, and highlight the latest developments.

Additionally, we do a detailed fundamental analysis, diving into the company’s management, market, financials, and growth estimates. We score each area separately, leading to a final score between 0 and 100. This score reflects how fundamentally attractive we believe the company is as an investment, ranging from:

🔴 Below 50 → Uninvestable
🟠 50 - 59 → Questionable
🟡 60 - 69 → Reasonable
🟢 70 - 79 → Quality
🔵 80 - 89 → High-Quality
🟣 90 or above → Exceptional

The goal? To give you a full deep dive into this company, as a complement to your own research, so you can decide if it’s the right investment for you.

In case you missed it, the two previous editions of Unpacked are now available to all subscribers, giving you a clear idea of how our fundamental analysis and scoring work. You can read them here for free:

• Unpacked #2: AppLovin

• Unpacked #1: McDonalds

In our third Unpacked, we’re diving into MercadoLibre — often called the “Amazon of Latin America”. MercadoLibre has quietly become a dominant player in one of the world’s fastest-growing digital markets. From e-commerce to fintech, it's building the infrastructure for the region’s digital economy.

Think of MercadoLibre as more than just an online marketplace. With its payment platform Mercado Pago, logistics network Mercado Envíos, and even its own credit services, the company has created a full ecosystem — much like Amazon has in the U.S., but tailored to the unique needs of Latin America.

So what makes MercadoLibre stand out? Is it their end-to-end control of the customer journey, their deep understanding of local markets, or the massive runway for growth in a region that’s rapidly coming online? And the big question: is MercadoLibre a smart long-term bet?

Now let’s unpack the fundamentals of this Latin American e-commerce giant — and check out how we score it!

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History and Business Model

MercadoLibre, which means “free market” in Spanish, was founded in 1999 by Marcos Galperin in Argentina. Galperin came up with the idea while studying for his MBA at Stanford University. Inspired by the rise of eBay in the U.S., he saw an opportunity to build a similar platform for Latin America — a region with a large population but limited access to e-commerce at the time.

The company started as an online marketplace where people could buy and sell products. Over the years, it expanded into new areas like online payments, logistics, advertising, and credit services. Today, MercadoLibre is active in 18 countries across Latin America, including Brazil, Mexico, Argentina, and Colombia. It’s now the biggest e-commerce and fintech company in the region.

A major turning point came in 2001 when eBay bought a stake in MercadoLibre and signed a strategic partnership. This gave the Latin American startup a big boost in credibility and helped it grow rapidly. While eBay later sold its shares, the early partnership helped shape MercadoLibre’s platform and growth strategy.

MercadoLibre operates through several main business units:

• Marketplace – This is the core platform where users can list and buy products. Like eBay or Amazon, it includes both new and used items from individuals and businesses.

• Mercado Pago – Launched in 2003, this is the company’s digital payments system. It allows users to pay for items online, in stores, and even transfer money between individuals. It has become one of the most widely used fintech solutions in Latin America.

• Mercado Envios – A logistics service that helps sellers deliver their products quickly and reliably. MercadoLibre doesn’t own all the delivery infrastructure itself but partners with logistics companies to handle shipping efficiently.

• Mercado Crédito – A lending platform that offers credit to both buyers and sellers. For example, it can give small loans to businesses selling on the platform or offer installment payment options (buy now, pay later) to buyers.

• Mercado Ads – Sellers can pay to promote their products or brands within the MercadoLibre ecosystem, similar to sponsored listings on Amazon or Google.

MercadoLibre makes money through transaction fees (from marketplace and payments), shipping services, interest on credit products, and advertising revenue. By building a full ecosystem around buying, paying, delivering, and financing, the company creates multiple revenue streams and keeps users within its platform.

What makes MercadoLibre unique is how it tailors its services to the needs of Latin America. Many people in the region don’t have traditional bank accounts or credit cards, so Mercado Pago and Mercado Crédito help make online shopping accessible to millions. Its logistics system also solves challenges related to unreliable shipping infrastructure in some areas.

Source: The Generalist; Finchat; Dealroom.co

The power of the MercadoLibre ecosystem lies in its integration of e-commerce, payments, logistics, advertising, and financing, making it essentially ten companies in one. In short, MercadoLibre is more than just an online store — it's a full digital e-commerce and finance ecosystem built for Latin America!

Revenue Breakdown

In the first quarter of 2025, MercadoLibre generated a total revenue of $5.94 billion. This revenue comes from several key business areas:

• Marketplace ($2.7 billion, 46%)
  This is the core e-commerce platform where buyers and sellers trade products. It includes fees from sales made on MercadoLibre’s website and app. Advertising revenue, such as sellers paying to promote their products and brands, is also included within this segment.

• Mercado Pago ($1.49 billion, 25%)
  Mercado Pago is the company’s digital payments platform. It earns money from transaction fees when users pay online, in stores, or transfer money.

• Mercado Crédito ($1.15 billion, 19%)
  This segment offers loans and credit services to buyers and sellers. Revenue comes from interest and fees on these financial products.

• Mercado Envios ($0.60 billion, 10%)
  This is MercadoLibre’s logistics and shipping service, helping sellers deliver products efficiently across Latin America.

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Recent Developments

We’ve seen MercadoLibre continue to grow and expand its reach across Latin America. Here are some of the most important recent developments:

1. Mercado Pago seeks banking license in Argentina
   A few days ago, Mercado Pago announced it will apply for a banking license from Argentina’s Central Bank. This will allow Mercado Pago to offer more digital financial services in Argentina, such as new investment options and credit products. This move is part of a larger plan to grow its services across Latin America, following similar steps already taken in Brazil and Mexico.

2. New CEO starting in 2026
   After 26 years, founder and CEO Marcos Galperin will step down on January 1, 2026 and move into the role of Executive Chairman. Ariel Szarfsztejn, the current Head of Commerce, will take over as CEO. This marks a leadership transition, but keeping Galperin closely involved.

3. Global trade shift could benefit Latin America
   Galperin recently said the U.S.-China trade war will lead companies to move production out of China. He believes this opens major opportunities for countries like Mexico and Argentina — and for MercadoLibre to grow along with that shift.

4. Verdi: MercadoLibre’s new AI assistant
   The company launched “Verdi,” a new AI platform powered by GPT-4o. It helps automate tasks like customer service, fraud detection, and product listings. Verdi already handles 10% of customer disputes and is saving millions in costs.

5. $13.2 billion investment plan
   MercadoLibre announced it will invest $13.2 billion to grow across Latin America in 2025. This includes hiring 28,000 new employees and expanding their logistic network, especially in Brazil and Mexico.

6. Moving U.S. legal base to Texas
   The company plans to change its legal home in the U.S. from Delaware to Texas. Shareholders will vote on this next month. The change is meant to give the company a more stable legal structure as the company scales.

These recent moves show us that MercadoLibre is focused on innovation, scaling, and expanding its services across Latin America. With new markets and opportunities ahead, we believe the company is well positioned to strengthen its role as the region’s leading e-commerce and fintech platform.

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Fundamental Analysis

In the fundamental analysis, we evaluate three key areas: management, market, and financials & growth estimates. Each aspect is scored individually, leading to a final score between 0 and 100, ranging from uninvestable to exceptional.

• Management (max 25 points):

  • CEO/Founder: 10 points

  • Glassdoor: 5 points

  • Historical management strength: 10 points

• Market (max 35 points):

  • Leadership & competition: 10 points

  • Moat (competitive advantage): 15 points

  • Total Addressable Market: 10 points

• Financials & Growth Estimates (max 40 points):

  • Revenue growth: 11 points

  • EPS growth: 7 points

  • Gross margin: 5 points

  • Net margin: 4 points

  • Free Cash Flow (FCF) yield: 3 points

  • Return on Invested Capital (ROIC): 3 points

  • Debt to Equity Ratio: 3 points

  • Earnings result: 4 points

Finally, we check if the stock meets certain criteria (as we believe these carry more risks), and points will be taken off for the following factors:

• Chinese company: -10 points
  Chinese companies receive -10 points because of higher geopolitical risks, unpredictable regulations, and limited transparency.

• High cyclical or high-risk sectors: Banks, Biotech, Energy, or Commodities: -10 points
  High cyclical or high-risk sectors receive -10 points because they are more sensitive to economic downturns and market volatility.

• Geopolitical risk: -5 points
  Geopolitical risk receives -5 points because it can lead to instability, affecting market performance and company operations.

• Small and Micro-cap stocks: -5 points / -10 points
  Small-cap stocks with a market cap < 2 billion receive -5 points and Micro-cap with a market cap < 300 million receive -10 points, because smaller companies often face higher volatility, limited financial resources, and more difficulty accessing capital.

• Altman Z and Piotroski-F: -4 points / -2 points
  The Altman-Z score and Piotroski-F score are financial models used to assess a company's financial health. The Altman-Z score predicts the likelihood of bankruptcy based on balance sheet ratios, while the Piotroski-F score evaluates financial strength through profitability, liquidity, and operational efficiency. A low Altman-Z or Piotroski-F score indicates weak financial health, suggesting a higher risk of financial distress or bankruptcy. For this reason, we deduct points from companies with low scores. When the Altman-Z score is <= 1.8, it falls in the Distress Zone, and the company receives -4 points. An Altman-Z score between 1.8 and 3 places the company in the Grey Zone, resulting in a deduction of -2 points. If the Altman-Z score is >= 3, the company is in the Safe Zone and receives no deduction. For the Piotroski-F score, a score between 0 and 3 indicates poor financial health, and the company receives -2 points. A score between 4 and 6 is considered stable, while a score of 7 or higher is considered good, with no deduction in points for these companies.

Final Scoring

To determine the investment potential of a stock, we use the following rating scale based on the final score:

🔴 Below 50 → Uninvestable
🟠 50 - 59 → Questionable
🟡 60 - 69 → Reasonable
🟢 70 - 79 → Quality
🔵 80 - 89 → High-Quality
🟣 90 or above → Exceptional

Unlock the full fundamental analysis below and see how we score MercadoLibre on a scale from 0 to 100 — exclusive available for our premium members! 🚀