MercadoLibre

Rising 30% so far in 2025 and now a $120 billion company, Latin American e-commerce and fintech juggernaut MercadoLibre (MELI 2.89%) may have investors feeling like they missed their opportunity to buy.

However, despite the company’s immense size, one key attribute makes it worthy of buying today: its growth optionality.

MercadoLibre’s seemingly endless ways to grow

Growth optionality, or a company’s flexibility to expand into new markets, is one of the most powerful forces for a stock. And MercadoLibre has growth optionality in spades.

Image source: Getty Images.

Expanding to all of Latin America

MercadoLibre is home to 71 million monthly active buyers who purchased over $15 billion worth of products in the last quarter. Yet Brazil, Argentina, and Mexico account for 96% of the company’s total sales, leaving a long growth runway as it expands into new countries.

As a whole, Latin America has 50% more people than the United States. Still, the region’s e-commerce penetration rate is only half that of its neighbor to the north, highlighting the vast opportunity that remains.

Advertising

The company grew its share of the Latin American digital ads market from 1.5% in 2019 to 6.7% in 2024. This market share makes it the third-largest advertiser in the area.

This burgeoning segment grew sales by 38% in the second quarter. With the Latin American retail media market expected to triple in size between 2024 and 2028, MercadoLibre’s rapid growth here should persist.

Business-to-business (B2B)

MercadoLibre recently launched its B2B offering, with 4 million users enabled to make wholesale purchases.

Management estimates this market is roughly four times the size of the company’s existing consumer marketplace. Any success here could be a major multiplier over time.

Fintech and credit

Home to 68 million monthly active fintech users, MercadoLibre is well positioned to disrupt the largely underbanked and cash-payment-heavy nature of most Latin American countries.

Furthermore, the company now has 35 million users in its credit portfolio — 60% of whom had no credit offers before.

Still growing sales by more than 30% quarter after quarter, MercadoLibre’s growth story is far from over.

Latin American consumer conglomerate MercadoLibre (MELI 0.10%) has drawn considerable interest from investors. The company spearheaded Latin American e-commerce and pioneered the fintech industry in the region through its business segment, Mercado Pago.

Moreover, investors may be curious to know how it fits with Warren Buffett‘s investment philosophy, even though Berkshire Hathaway does not hold any MercadoLibre shares. Still, comparing MercadoLibre to Buffett’s philosophy could help investors better understand this investment and determine whether it is suitable for them.

Image source: Getty Images.

Inconsistencies with Warren Buffett’s philosophy

On the surface, it is not immediately apparent how well MercadoLibre’s stock and business align with Buffett’s philosophy. Buffett has tended to avoid companies in countries with unstable political environments. Berkshire sold Taiwan Semiconductor Manufacturing (TSMC) due to Taiwan’s precarious political position, so the same sentiment could discourage him from investing in MercadoLibre.

That does not always mean Berkshire avoids companies operating in the developing world. Buffett has invested in several Chinese companies and also showed interest in Latin American fintech a few years ago. For a time, it owned shares in Brazilian fintech stocks StoneCo and Nu Holdings, parent of the world’s largest digital bank outside of Asia.

However, it has since sold both companies without an explanation. That could mean Buffett feels increasingly uncomfortable with these markets.

That discomfort is likely to discourage Buffett and his team from paying a premium for such stocks. Unfortunately for Berkshire, MercadoLibre trades at a 58 P/E ratio, meaning it may have to pay more than a fair price to take advantage of this opportunity.

Why MercadoLibre may fit Buffett’s investing approach

However, most of the inconsistencies are countered by Berkshire’s ownership of one company: Amazon. Amazon is MercadoLibre’s counterpart in the developed world. It is also a company that Buffett said he was “an idiot” for not seeing its potential earlier. Until recently, Amazon had an elevated P/E ratio, so it is possible he set his valuation concerns aside when his company purchased shares in 2019.

That is critical, since MercadoLibre seems to see some of the same valuation trends as Amazon when it was a smaller company. Additionally, Buffett likes industry leaders. That fits the description of Berkshire’s three largest positions, Apple, Bank of America, and American Express, all of which are among the top companies in their respective fields.

More importantly, Buffett likes to see long-term competitive advantages in stable industries, and MercadoLibre mostly fits that description. As mentioned, the company pioneered e-commerce in Latin America. Furthermore, it leads its region in fintech and has developed a shipping and fulfillment network that gives it a competitive edge.

Indeed, investors tend not to associate Latin America with stability. Nonetheless, from building a logistics operation to developing Mercado Pago to sell online in a cash-based society, MercadoLibre has successfully turned regional challenges into advantages.

Is MercadoLibre stock a Buffett-worthy investment?

MercadoLibre stock is a worthy investment, but Warren Buffett more than likely does not see it that way. Indeed, MercadoLibre’s leadership in e-commerce and fintech in Latin America is likely to bolster the stock, even at a 58 P/E ratio. Since it possesses the unique talent of turning regional adversity into a revenue source within fast-growing industries, the stock is likely to continue its upward trend in the longer term.

Still, Buffett ultimately has shown little tolerance for political instability. His past positions in StoneCo and Nu Holdings showed some open-mindedness, but the fact that Berkshire sold these positions without any apparent justification is telling. His sale of TSMC seems to confirm these feelings.

Ultimately, given its history and resilience, long-term investors are likely to outperform the market with MercadoLibre stock. Just don’t expect Buffett to follow that lead.