This E-Commerce Stock Could Be the Best Investment of the Decade

Several of the world's leading e-commerce stocks minted a lot of millionaires over the past few decades. For example, a $30,000 investment in Amazon's IPO in 1997 would have blossomed to a whopping $92 million today. That same investment in Shopify's IPO in 2015 would have grown to about $1.3 million.

Amazon and Shopify are still both solid long-term plays on the secular growth of the e-commerce market, but it could be tough to replicate those massive gains over the next decade. So if you're looking for another potential multibagger in the crowded e-commerce sector, you should check out MercadoLibre (NASDAQ: MELI), the growing market leader in Latin America.

Image source: Getty Images.

Why is MercadoLibre growing so rapidly?

MercadoLibre was founded in 1999, and it established a first mover's advantage in Latin America's nascent and fragmented e-commerce market by building reliable logistics networks across the region's challenging terrain. It now operates its marketplace across 18 countries, but it generates most of its revenue in Brazil, Mexico, and Argentina.

MercadoLibre capitalized on that growth by locking its shoppers into its Mercado Pago digital payments platform. This platform became the foundation of its fintech ecosystem, which offers additional credit card, lending, and cryptocurrency trading services. The stickiness of that ecosystem widened the company's moat against its regional and overseas competitors.

From 2013 to 2023, MercadoLibre grew its gross merchandise volume (GMV) at a compound annual growth rate (CAGR) of 20%, its total payment volume (TPV) at a CAGR of 54%, and its total revenue at a CAGR of 41% in USD terms. Its number of annual unique buyers more than quadrupled, from 20.2 million to nearly 85 million.

That growth was driven by rising income levels and internet penetration rates across Latin America, which fed the growth of the region's e-commerce and fintech platforms. That shift further accelerated during the COVID-19 pandemic. But according to Grand View Research, the Latin American e-commerce market could still expand at a CAGR of 14.6% from 2024 to 2030 as more shoppers pivot from brick-and-mortar retailers.

MercadoLibre also recently applied for a banking license in Mexico, which indicates it's interested in challenging Nu Holdings in the online-only "neobanking" market. About 70% of Latin America's population is still unbanked, according to the World Bank, which makes it a fertile market for launching new digital banking services. That's why Grand View Research expects the Latin American neobanking market to grow at a whopping CAGR of 54.8% from 2023 to 2030.

Meanwhile, MercadoLibre's margins improved as economies of scale diluted its logistics and payment processing expenses. That's why it turned firmly profitable in 2021 and grew its net income at a CAGR of 244% over the following two years.

Why could MercadoLibre be a great investment for the next decade?

MercadoLibre served 87 million active buyers and 56 million fintech monthly active users in the first nine months of 2024. But the company still has plenty of room to grow before it saturates Latin America's regional population of more than 660 million people.

For now, analysts expect MercadoLibre's revenue and net income to grow at CAGRs of 29% and 48%, respectively, from 2023 to 2026. Its stock still looks reasonably valued relative to those estimates at 41 times next year's earnings.

Let's assume MercadoLibre matches Wall Street's expectations, continues to grow its EPS at a robust CAGR of 25% over the following eight years, and still trades at about 40 times earnings by the final year. If it checks all those boxes, the company's stock price could rise from about $1,900 today to $15,200 over the next 10 years. That eight-bagger gain would boost its market cap from $96 billion to about $768 billion -- but that would still make it smaller than Amazon, which is already worth $2.4 trillion today.

MercadoLibre's business could be affected by inflationary, political, and regulatory issues in Latin America over the next decade. But the company has weathered plenty of those headwinds before, and I believe it could keep growing for the foreseeable future. Investors who buy MercadoLibre's stock today and tune out the near-term noise could reap some big long-term gains.

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John Mackey, former CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool's board of directors. Leo Sun has positions in Amazon and MercadoLibre. The Motley Fool has positions in and recommends Amazon, MercadoLibre, and Shopify. The Motley Fool recommends Nu Holdings. The Motley Fool has a disclosure policy.