What Happened?
Shares of latin American e-commerce and fintech company MercadoLibre (NASDAQ: MELI) jumped 7.3% in the afternoon session after the company reported impressive first-quarter 2025 results, which significantly blew past analysts' revenue, EPS, and EBITDA expectations.
The key highlight for the quarter was Argentina's staggering revenue growth of 184%, powered by triple-digit expansion in gross merchandise volume and a sharp rebound in consumer demand. As a result, sales climbed 37% from the previous year. Profits also improved meaningfully, aided by scale efficiencies and lower fulfillment costs per order in major markets like Brazil and Mexico. The EPS beat was a direct result of these gains, reflecting improved execution despite currency headwinds in Brazil and investment drag in Mexico.
Overall, it was a strong quarter for MercadoLibre, driven by outsized growth in Argentina, resilient consumer demand, and encouraging momentum in fintech and advertising, despite mixed buyer metrics.
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What The Market Is Telling Us
MercadoLibre’s shares are somewhat volatile and have had 10 moves greater than 5% over the last year. In that context, today’s move indicates the market considers this news meaningful but not something that would fundamentally change its perception of the business.
The biggest move we wrote about over the last year was 6 months ago when the stock dropped 16.3% on the news that the company reported weaker third-quarter earnings.
The main reason was that it missed on operating income margin because it ramped up investments in its credit and logistics businesses. Ramping up loan originations leads to the recognition of the allowance for doubtful accounts upfront (the expected losses on the loans). However, the new loan originations came from credit cards and moving up-market to higher-quality customers. Because these new accounts have lower default risk, the yields are lower and result in a lower blended NIMAL spread (aka margins). The new loans are additive to overall profit dollars, lower the risk of the broader credit portfolio, and increase MELI's market share and stickiness/wallet share with customers.
On the other hand, MercadoLibre delivered impressive revenue growth this quarter. Overall, the stock is reacting to the bottom line miss.
MercadoLibre is up 36.7% since the beginning of the year, and at $2,413 per share, has set a new 52-week high. Investors who bought $1,000 worth of MercadoLibre’s shares 5 years ago would now be looking at an investment worth $3,076.
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