Why MercadoLibre’s earnings triggered such a strong stock reaction

MercadoLibre (MELI) reported fourth quarter 2025 revenue of US$8.76b and net income of US$559m, a result that paired strong business activity with higher spending and thinner margins.

For the full year 2025, revenue reached US$28.89b and net income was US$1.997b, with earnings per share from continuing operations at US$39.40 on both a basic and diluted basis.

MercadoLibre’s recent earnings release and increased spending on logistics, AI and marketing arrived after a sharp reset in sentiment, with a 30 day share price return of 17.26% decline and a 1 year total shareholder return of 14.17% decline, although the 3 year total shareholder return of 41.45% shows longer term holders have still seen meaningful gains.

If MercadoLibre’s pullback has you looking around Latin American tech and commerce, it could be a good moment to broaden your search with our 19 top founder-led companies.

With MercadoLibre’s share price down over the past year, valuation screens flagging a discount to some targets, and profits under pressure from heavy investment, investors face a key question: is this a buying opportunity or is the market already pricing in future growth?

Most Popular Narrative: 56.7% Undervalued

At a last close of $1,777, the leading narrative puts MercadoLibre’s fair value at $4,101, which implies a large gap between price and story.

The narrative for this call is no longer about "selling stuff"; it is about Mercado Pago eclipsing the e-commerce business as the primary profit engine. Investors are bracing for the "NPL Scare." In late 2025, provisions for doubtful accounts (bad loans) surged 58% as MercadoLibre aggressively expanded its credit book in Brazil and Mexico. The street is concerned that they are lending too fast to unbanked customers. If management can show that Non-Performing Loans (NPLs) have stabilized or that the Interest Income (NIM) is outpacing the defaults, the stock could move significantly higher.

According to Vestra, that $4,101 fair value leans heavily on Mercado Pago’s profit potential, tight credit assumptions and a richer future earnings multiple. Curious which inputs really carry the weight here, and how they connect back to today’s margin pressures and credit concerns? The full narrative lays out those moving parts in detail.

Result: Fair Value of $4,101 (UNDERVALUED)

However, that story can break if credit losses climb faster than interest income, or if competition in payments and logistics starts to erode MercadoLibre’s ecosystem advantages.

Another Take: What Earnings Ratios Are Saying

That $4,101 narrative fair value paints a very optimistic picture, but the P/E snapshot is less one sided. MercadoLibre trades at 45.1x earnings, richer than the North American Multiline Retail average of 17.6x and its own 32.8x fair ratio, yet below a 59x peer average.

In plain terms, the market is still paying up for growth and ecosystem strength, but not as much as for some peers, and more than what the fair ratio suggests it could drift toward. For you, that tension is the real question: is this a premium you are comfortable paying if the story wobbles?

Next Steps

If this combination of pressure and potential seems finely balanced, it may be worth quickly reviewing the numbers and context yourself, including our breakdown of 4 key rewards and 2 important warning signs.

Looking for more investment ideas?

If you are weighing your next move after MercadoLibre, give yourself options by scanning other opportunities now, rather than waiting for the market to make the decision for you.

• Start building a watchlist of quality names by checking companies highlighted in our 45 high quality undervalued stocks that could offer more for every dollar you commit.
• Protect your downside by reviewing our 76 resilient stocks with low risk scores, focused on businesses that pair resilient profiles with measured risk scores.
• Hunt for fresh opportunities before they hit the mainstream using the screener containing 24 high quality undiscovered gems, where we surface lesser known companies with solid fundamentals.

This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.