MercadoLibre (MELI) Stock Forecast & Price Target

MercadoLibre has showcased robust growth in its advertising segment, with ad revenue soaring 41% year-over-year, which reflects a significant contribution of 2.1% to Gross Merchandise Volume (GMV). The company's expansion in GMV, which increased by 56% ex-FX in the fourth quarter, is driven by enhanced service levels and new product launches, alongside a notable year-on-year increase in the number of unique buyers engaging with multiple categories. Furthermore, the improvement in the net income margin, which expanded by 340 basis points sequentially, indicates effective management of operational costs and increased profitability potential.

MercadoLibre faces a challenging outlook due to anticipated pressure on its NIMAL and EBIT margins, particularly within its credit business, which may decline over the next few years. The company is exposed to several significant risks, including heightened competition from local and APAC players, volatility in the Latin American macroeconomic environment, and widening spreads between the official and blue dollar rates in Argentina, all of which could adversely affect its growth and profitability. Additionally, the expectation of a discount to recent averages in target multiples reflects concerns over potential deceleration in growth, alongside the burden of high net shipping costs that significantly impact its overall financial performance.