Hey guys,
Today I want to introduce you to a company that might not be on your radar yet, but definitely has the potential to change your attention (and maybe your portfolio): Mercado Libre ($MELI (+0,15 %)).
Meli is Latin America's largest company by market capitalization with a valuation of around 100 billion dollars. But it's much more than just an online marketplace.
Why is Meli so special?
- An ecosystemthat connects everything: Meli has built an impressive ecosystem that includes e-commerce, logistics, payment processing, lending and even advertising. It is not just a marketplace, but a complete "operating system" for commerce in Latin America.
- Strong competitive advantagesThe company has gained a strong competitive advantage through its extensive logistics network, established brand and huge user base.
- Mercado Pago is not only a payment processor, but also offers credit solutions, digital wallets and even investment accounts. What makes Mercado Pago special is that it operates independently of traditional banks, which allows Meli to keep a bigger slice of the pie. In the third quarter of 2024, this segment accounted for 41% of total revenue.
- Meli has its own logistics division Mercado Envios which covers everything from storage to delivery. This is crucial for meeting the needs of customers in Latin America and reducing delivery times.
- Growth potential: Latin America is a region with a young, growing population and increasing internet penetration. The e-commerce market in Latin America is expected to grow from 151 billion dollars in 2024 to 232 billion dollars in 2028.
The business segments in detail:
- Marketplace: the heart of the business, bringing sellers and buyers together.
- Mercado Pago: A comprehensive fintech offering that includes payments, loans and more.
- Mercado Crédito: Loans for consumers and small businesses that are often overlooked by traditional banks.
- Mercado Envios: The logistics division that ensures fast and reliable deliveries.
- Mercado Ads: A growing advertising platform with high margins.
- Mercado Shops: Enables merchants to create their own online stores.
Competition and challenges:
Meli is not without competition. Amazon, Shopee and AliExpress are also active in Latin America. However, Meli has a head start due to its deep understanding of the Latin American market and its customized solutions. Nevertheless, there are risks, such as economic volatility in the region and price pressure in e-commerce.
Financial performance:
Meli has a remarkable track record. The company has been consistently cash flow positive since 2007 and has achieved sales growth of 36x over the last ten years.
What does this mean for investors?
Meli is a company that is in a fast-growing market and has a solid business model. The company is very well positioned to benefit from the increasing digitalization in Latin America.
- Long-term growth potential: The combination of e-commerce, fintech and logistics makes Meli a promising long-term investment.
- Innovation driver: Meli is constantly striving to develop new services and improve its existing offerings.
- Strong leadership: The management has proven that it is able to overcome challenges and lead the company successfully.
Conclusion
Mercado Libre is more than just an online marketplace - it is a driving force of digital transformation in Latin America. If you are looking for a company with real growth potential, you should definitely keep an eye on Meli.
Are you already following the company? What do you think of the Latin American market in general?
