Investing in Investing in MercadoLibre, Inc (MELI) Stocks



MercadoLibre, Inc (MELI) is an e-commerce company that operates primarily in Latin America. As the region’s most popular online marketplace, MercadoLibre has often been referred to as the eBay of Latin America. While their most popular service remains their online commerce platform, the company’s secure payment platform Mercado Pago is becoming a very important part of MercadoLibre. Mercado Pago not only processes payments within MercadoLibre’s marketplace, but also is used increasingly by individuals to make peer-to-peer transactions. Together, the online commerce platform and Mercado Pago are helping MercadoLibre create a financial ecosystem to meet the needs of a rapidly growing population in Latin America.

What is MercadoLibre, Inc (MELI)?

MercadoLibre, which translates to “free market” in Spanish, was founded by Argentinian businessman Marcos Galperinin in 1999. While going to school in the United States, Galperinin was motivated to create a platform to help improve societal and economic conditions back home. Through MercadoLibre, Galperinin created a service that allowed individuals to access a marketplace where they could buy and sell goods and services online. Several investors were interested in the concept and in the company’s mission during the company’s early years. Most noteworthy was eBay, an early investor that acquired 19.5 percent of the company in 2001. This partnership was mutually beneficial, allowing MercadoLibre to grow and giving eBay a window to enter the Latin American market.

After becoming the first Latin American company to list on the NASDAQ in 2007, the company has not left its roots behind. MercadoLibre continues to operate exclusively in Latin America, one of the fastest-growing regions in the world. The company currently services 18 countries in the region and employs over 11,000 employees in their Buenos Aires headquarters and other offices around Latin America. Alongside their online commerce platform, the company has also established several other services that have become a vital part of life for many Latin Americans.

Why does MercadoLibre, Inc (MELI) Matter?

As mentioned, the Mercado Pago payment solutions platform is quickly becoming one of the most important parts of the company’s growth strategy. Mercado Pago started off as a way of complimenting the online marketplace platform, providing the company with a way to facilitate transactions within the marketplace. However, the Mercado Pago began to take off as a separate service offering altogether. Nowadays, users are mostly using Mercado Pago to send and receive payments to other users, either virtually or in-person, similar to Cashapp or Venmo in the United States. Mercado Pago has seen rapid growth in recent years. A significant milestone was reached in 2019, when Mercado Pago transactions made outside of the MercadoLibre online commerce platform surpassed transactions made within the platform for the first time. This growth trajectory is very similar to PayPal, which started off highly reliant on eBay transactions before it began seeing massive growth and independent success.

As mentioned, Paypal was an early investor and has continued to show interest in the company throughout its growth. The two companies have partnered on several fronts. In 2019, Paypal announced that users of MercadoLibre marketplace in Brazil and Mexico would be able to use PayPal for online checkouts, providing access to online shopping and online payments to millions of existing customers. In addition, any merchants in these countries that accepted PayPal would also start accepting Mercado Pago as a payment option. This has unlocked a user base of over 300 million PayPal users, allowing them to make purchases from any of the 500,000 sellers on MercadoLibre.  This integration between the two companies followed a $750 investment by PayPal into MercadoLibre earlier that year.

MercadoLibre, Inc (MELI) Prospects

As time goes on, more and more Latin Americans are earning and saving money, increasing the need to access the type of services MercadoLibre is offering. In 2019, over half of the population of Latin America was unbanked or underbanked. This meant that aside from cash, there were no other options for individuals in the region to make purchases. As MercadoLibre became more well established, more merchants were accepting Mercado Pago as a form of payment. Aside from the online digital payment aspect of Mercado Pago,  MercadoLibre has also created products to facilitate real-world physical transactions. In 2015, the company created a point of sale product, similar to the card reader Square offers. This option saw heavy adoption by small businesses around the region. As Mercado Pago usage becomes more and more widespread, businesses will increasingly see the benefits of integrating Mercado Libre’s payment options into their physical and virtual storefronts.

While MercadoPago is one of the most promising offerings from the company, there are other areas MercadoLibre is branching out to as well that are worth mentioning. Mercado Credito, which offerings capital loans to merchants, is another important service line that has potential for future growth. This service is relatively new, but the company has also expressed interest in expanding into consumer lending as well. Bringing these types of services into the MercadoLibre ecosystem will be important for future growth, as customers are increasingly looking for an end-to-end streamlined approach to their finances. Ultimately, the goal would be to bring the ability to borrow, save, and spend money all through one application. With little competition from larger fintech’s such as Square and Paypal in the region, MercadoLibre has the potential to create a financial ecosystem that is unrivalled by any other company.

Where to Buy MercadoLibre, Inc (MELI)?

A broker that we recommend is Firstrade.

Firstrade is a leading online brokerage firm offering a full line of investment products and tools designed to help investors like you take control of your financial future. Since its founding in 1985, Firstrade has been committed to providing high value and quality services.

Combining proprietary trading technology, a highly intuitive user interface, outstanding customer service and mobile applications, Firstrade offers a comprehensive solution for all of your investing needs.  Firstrade is a member of FINRA/SIPC.

Summary

MercadoLibre is a company that has expanded from one core service to a multifaceted financial technology giant. With the market domination the company enjoys in Latin America, demand for their services will not be disappearing anytime soon. Their ability to branch out and create service offerings such as Mercado Pago to compliment their core business has been one of the main reasons for their impressive growth. As new ideas surface as a result of the company’s innovative strategy, MercadoLibre has the potential to create a financial services ecosystem that can compete with some of the top companies in the world.



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