Key Takeaways
- Shares of MELI declined 6.8% in Thursday’s session, now trading 37% below the 52-week peak of $2,614 at approximately $1,649
- Analysts at JPMorgan shifted their rating from Overweight to Neutral while slashing the price target from $2,650 down to $2,100
- The investment bank forecasts MELI’s 2026 profit margins will drop by roughly 1.8 percentage points, landing approximately 15% beneath market expectations
- Intensifying rivalry from Amazon and Sea Limited’s Shopee platform in Brazil is squeezing profitability
- Despite achieving 44% revenue expansion in 2025, MELI’s bottom line grew a mere 5%, hampered by mounting bad debt reserves
Thursday proved to be another difficult session for MercadoLibre. The dominant Latin American online marketplace and digital payments provider tumbled 6.8% during afternoon hours, extending a painful decline that has now erased nearly 37% of value from its June 2025 high of $2,614. Trading near $1,649, shareholders who enjoyed last summer’s rally are now nursing substantial losses.
Part of Thursday’s selloff stemmed from broader market turbulence. Heightening U.S.-Israeli military operations targeting Iran drove oil prices sharply higher, triggering nervousness across global equity markets. Goldman Sachs warned of a 25% probability that the U.S. economy enters recession within the next twelve months. Major indices including the S&P 500, Dow Jones, and Nasdaq each shed approximately 1% as risk appetite evaporated.
Yet MELI faces challenges that extend well beyond crude oil volatility and Middle Eastern tensions.
Wall Street Bank Removes Bullish Stance
JPMorgan shifted its stance on MercadoLibre Thursday, moving from Overweight to Neutral while lowering the firm’s price objective from $2,650 to $2,100. Analysts pointed to persistent competitive dynamics in Brazil and mounting margin headwinds as primary catalysts behind the rating change.
Management commentary from MELI’s CFO suggested the organization is prepared to accept operating margins hovering around 9% in the immediate term. That outlook alarmed Wall Street observers. JPMorgan subsequently lowered its 2026 margin projection to 8.8% and now anticipates the company’s earnings before interest and taxes will miss consensus forecasts by roughly 15% for the full year — with an even steeper 24% shortfall expected in the first quarter of 2026.
The financial institution also trimmed its long-range margin target to 14% from a previous 17% estimate, acknowledging limited clarity regarding when profitability metrics might strengthen.
Meanwhile, Sea Limited’s Shopee marketplace shows no signs of retreating from Brazilian territory. The platform intends to reinvest savings generated from recent take-rate adjustments into promotional incentives linked to Brazil’s Pix instant payment infrastructure, sustaining competitive intensity.
Financial Performance Reveals Strain
MELI’s complete 2025 fiscal year results presented a contradictory picture. Total revenue reached $29 billion, representing impressive 44% year-over-year expansion — the type of growth trajectory that remains elusive for most corporations. However, net profit advanced merely 5% to $2 billion.
The primary drag: a substantial 66% surge in allowances for uncollectible receivables, reflecting the company’s ambitious lending portfolio expansion. Credit outstanding skyrocketed 90% during Q4 2025. Operating margin contracted to 11.1% from the prior year’s 12.7%.
Management has since implemented tighter underwriting standards, establishing more conservative caps on individual loan amounts. The organization is also deploying artificial intelligence tools and customer analytics to more accurately flag higher-risk borrowing candidates.
On the commerce front, Amazon persistently gains market share across numerous Latin American territories, introducing additional headwinds.
Regional Developments and Future Outlook
Certain macroeconomic indicators offer encouragement. Argentina has witnessed declining poverty rates, despite inflation remaining elevated near 32%. Venezuelan crude exports have climbed to their strongest levels since 2018 following recent political transitions — suggesting improving economic fundamentals in an important regional market.
JPMorgan maintains expectations for long-term earnings to compound at approximately 32% annually from 2026 through 2029. Nevertheless, the firm anticipates the market will refrain from assigning premium valuation multiples to that growth potential throughout 2026 given substantial near-term ambiguity.
MELI’s price-to-earnings multiple has compressed to roughly 44. Shares have surrendered 16.5% year-to-date.
