Key Takeaways
- Shares of MELI declined 6.8% Thursday, now trading 37% below the 52-week peak of $2,614 at approximately $1,649
- JPMorgan revised its rating on MELI from Overweight to Neutral, slashing the price target from $2,650 down to $2,100
- The investment bank projects MELI’s 2026 profit margins will fall short by approximately 1.8 percentage points, roughly 15% under market expectations
- Intensifying rivalry from Amazon and Sea Limited’s Shopee platform in Brazil weighs on profitability
- While MELI achieved 44% revenue expansion in 2025, net profit increased merely 5%, hampered by escalating loan loss reserves
Thursday proved to be another challenging day for MercadoLibre investors. The dominant Latin American online marketplace and financial technology player tumbled 6.8% during afternoon sessions, extending a steep decline that has erased approximately 37% of shareholder value since reaching $2,614 in June 2025. Trading near $1,649, the stock has left many investors nursing significant losses.
Broader market turbulence contributed to Thursday’s selloff. Rising tensions between the U.S., Israel, and Iran triggered a spike in crude oil prices, unsettling investors worldwide. Goldman Sachs raised its U.S. recession probability to 25% for the coming twelve months. Major indices including the S&P 500, Dow Jones, and Nasdaq each shed roughly 1% as capital flowed toward defensive positions.
However, MELI faces challenges that extend well beyond macroeconomic headwinds.
JPMorgan Abandons Bullish Stance
On Thursday, JPMorgan shifted its position on MercadoLibre, downgrading shares to Neutral from its previous Overweight recommendation while reducing the price objective from $2,650 to $2,100. The firm pointed to escalating competitive dynamics in Brazil and compressed profit margins as primary concerns driving the revision.
MELI’s chief financial officer recently signaled the company’s willingness to accept operating margins hovering around 9% in the immediate future. This disclosure alarmed Wall Street analysts. JPMorgan subsequently lowered its 2026 margin forecast to 8.8%, now projecting the company’s earnings before interest and taxes to miss consensus estimates by approximately 15% for the full year — with a particularly sharp 24% shortfall anticipated for the first quarter of 2026.
The bank also trimmed its long-term profitability expectations to 14% from 17%, acknowledging uncertainty around when earnings power will meaningfully improve.
Sea Limited’s Shopee continues applying pressure in the Brazilian market. The Singapore-based competitor intends to reinvest cost savings from recent fee structure adjustments into promotional incentives linked to Brazil’s Pix digital payment infrastructure, maintaining aggressive competitive dynamics.
Financial Performance Reveals Cracks
MELI’s full-year 2025 financial results painted a complicated picture. Total revenue reached $29 billion, representing robust 44% year-over-year expansion — the type of top-line growth that would typically excite investors. However, net income advanced just 5% to reach $2 billion.
The primary driver behind the profit squeeze: provisions for doubtful accounts surged 66%, reflecting the company’s ambitious lending expansion. Credit portfolio growth accelerated to 90% during Q4 2025. Meanwhile, operating margin contracted to 11.1% from the prior year’s 12.7%.
Management has since implemented tighter underwriting standards, establishing more conservative limits on individual loan amounts. The company is also leveraging artificial intelligence and customer behavioral data to improve risk assessment and identify potentially problematic borrowers earlier.
On the commerce front, Amazon maintains its steady encroachment across Latin American territories, creating additional headwinds for MELI’s core marketplace business.
Regional Dynamics Offer Mixed Signals
Some positive developments are emerging in key regional markets. Argentina has achieved measurable poverty reduction despite persistent inflation running near 32%. Venezuela’s petroleum exports have climbed to their strongest levels since 2018 following recent political transitions — suggesting economic stabilization in an important territory.
JPMorgan maintains a constructive long-term outlook, projecting earnings will compound at approximately 32% annually from 2026 through 2029. Nevertheless, the firm doesn’t anticipate the market will reward this growth trajectory during 2026 given substantial near-term execution risks.
MELI’s price-to-earnings multiple has compressed to roughly 44. Year-to-date, shares have retreated 16.5%.
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