MercadoLibre’s focus on e-commerce in Latin America positions it for substantial growth in a region with increasing access to broadband and mobile connectivity.
Amazon’s remarkable success as one of the market’s best-performing stocks of all time is undeniable. However, as the e-commerce giant’s growth potential becomes increasingly limited due to its size, investors may be seeking the next big opportunity. Enter MercadoLibre, often referred to as “the Amazon of Latin America.” With a diverse range of businesses, including e-commerce, digital payments, logistics, and digital advertising, MercadoLibre is poised for significant growth in a region that is experiencing a surge in broadband and mobile connectivity.
Latin America’s Evolving Market and MercadoLibre’s Potential
Latin America’s e-commerce market is undergoing a major transformation, presenting a significant growth opportunity. With MercadoLibre at the forefront, the region is witnessing the rise of a potential market leader. However, labeling MercadoLibre as merely the “Amazon of Latin America” does not fully capture its true potential. The company’s digital payments platform, logistics services, and point-of-sale equipment make it a multifaceted player in the market.
South America’s increasing access to broadband and mobile connectivity is a key driver of MercadoLibre’s growth. According to S&P Global Market Intelligence, as of the end of last year, only about half of Latin America and the Caribbean’s residents had access to at-home broadband. However, this penetration rate has significantly increased over the past decade, similar to the growth seen in the United States a decade ago. This proliferation of high-speed connectivity is expected to fuel the growth of e-commerce in the region.
Mobile phone penetration is also on the rise in Latin America. Market research firm GSMA estimates that as of 2021, 69% of the continent’s residents owned mobile phones, compared to 56% in 2010. This growing mobile crowd is likely to embrace the convenience of mobile shopping and mobile wallets. Mordor Intelligence projects that Latin America’s mobile payment market will grow at an annualized pace of 24.5% through 2028.
MercadoLibre’s Market Position and Financial Performance
MercadoLibre is not only capitalizing on this market tailwind but is also outperforming its competitors. Insider Intelligence reports that the company currently holds a market-leading 21% share of Latin America’s e-commerce market after years of steady growth. While this share may seem modest compared to Amazon’s nearly 40% share in the U.S., it is comparable to where Amazon stood in the U.S. market around 2014.
Importantly, MercadoLibre’s growing share of a rapidly expanding market is translating into impressive financial results. In the last quarter, the company’s gross merchandise volume increased by 32% year over year, while revenue grew by 40%. Analysts expect MercadoLibre’s revenue to continue growing at a rate of approximately 23% next year, driving per-share earnings from $22.38 this year to $33.47 in 2024. This strong sales growth is projected to last through 2027.
Expanding Payment Technology and Integration
MercadoLibre is also expanding the reach of its payment technology. Although its mobile payment and banking app currently handles only about 5% of the region’s digital payments, last quarter’s total payment volume surged by 47% year over year. The addition of credit cards and new payment features to the app has proven to be a significant boost to the company’s results. Furthermore, MercadoLibre’s relatively modest market share in the digital payments space sets the stage for robust growth in the future.
Unlike Amazon, MercadoLibre is strategically integrating its e-commerce platform with its payment platform, ensuring that both aspects grow symbiotically. This approach gives consumers less time and reason to become comfortable with a rival mobile wallet, strengthening MercadoLibre’s position in the market.
Conclusion:
While no investment is entirely risk-free, the parallels between Amazon’s growth trajectory in the past decade and MercadoLibre’s current position in Latin America are hard to ignore. With a diverse range of businesses and a dominant market share in a region experiencing rapid growth in broadband and mobile connectivity, MercadoLibre is well-positioned for continued success. As Latin America’s economy grows and e-commerce volume surges, MercadoLibre’s potential for substantial growth remains promising. Investors looking for the next Amazon-like opportunity should keep a close eye on MercadoLibre.
Leave a Reply