Prediction: MercadoLibre Stock Will Beat the Market. Here's Why.

It's been quite a week for the stock market. Although it reached down into bear territory, it has also proven resilient at certain moments. There have been wild swings, and by the time this is published, it could again look a whole lot different.

The S&P 500 is the standard market index, but it only includes 500 stocks, and they're all U.S.-based businesses. The index itself is just an average, which means some of the stocks included are performing better than the index itself.

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MercadoLibre (NASDAQ: MELI) is a Latin American e-commerce giant that wouldn't be included in the S&P 500, but it's beating it now, and it's likely to keep outperforming it by a wide margin over time. Here's why.

A leading tech company in Latin America

MercadoLibre means "free market" in Spanish, an ironic name in today's climate. The company operates an e-commerce and fintech business in 18 countries in Latin America, and it's growing rapidly.

Its main business is still e-commerce, but it has expanded into a full financial services platform. It offers digital payments, investing tools, credit products, and more, and its first full digital bank is in the works in Mexico.

In the 2024 fourth quarter, revenue increased 96% year over year (currency neutral). Gross merchandise volume was up 56%, and items sold increased 27%. Unique buyers rose 24% and exceeded 100 million for the first time.

On the fintech side of things, total payment volume increased 49%, and monthly average users were up 34% to $61.2 million. The credit portfolio increased 74% to $6.6 billion, and assets under management increased 129% to $10.6 billion.

It's also a highly profitable venture, and that's becoming more robust at scale. Operating income climbed from $335 million to $820 million year over year, and comparable operating margin expanded from 13.5% to 14.1%.

Massive opportunities ahead

Although MercadoLibre has been a growth machine for years, it's still just getting started and has a massive opportunity ahead. E-commerce penetration in its region is around 14.4%, or way behind the U.S. and China, which are 28.8% and 38.1%, respectively.

Management has cited third-party data that forecasts the market increasing from $151 billion in 2023 to $232 billion by 2028. As the leader in the region, MercadoLibre has a first-mover's edge in capturing the market as it grows. It already has a strong, recognized brand, and it's making investments in keeping its dominant position, such as high same-day or two-day delivery rates.

In fintech, much of the region's population is still underbanked, and there's plenty of room for financial disruption. In Mexico, where MercadoLibre is focusing right now, less than half of the population has a bank account and only a fifth of the population has a credit card. That's a target market ripe for the taking. In the wider Latin American region, only 74% of people have a bank account and 28% have a credit card, in contrast with 95% and 67%, respectively, in the U.S.

Again, MercadoLibre is well-positioned to both create and benefit from the shift. That doesn't even include MercadoLibre's advertising business and new opportunities, of which there are many.

Beating the market today

MercadoLibre stock is up 7% year to date while the S&P 500 is down 15%. There are a number of reasons investors see it as a safe play right now. Aside from the usual, which is its excellent performance and incredible opportunity, it doesn't have the same exposure to the tariff program that's been shocking the markets because it's not a U.S. company. That adds a layer of safety right now as the markets get roiled.

Even better, MercadoLibre stock trades at a forward one-year P/E ratio of 28. That's an attractive valuation for a company with as much potential as MercadoLibre, and now is an excellent time to open a position or add shares to your portfolio.

Should you invest $1,000 in MercadoLibre right now?

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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. Jennifer Saibil has positions in MercadoLibre. The Motley Fool has positions in and recommends Amazon and MercadoLibre. The Motley Fool has a disclosure policy.