$MELI

I have not shared my thoughts on the business for several months now. Despite the stock falling ~40% in the past year, I have not added in a while.

This was largely because I thought the business would struggle under increased competitive pressure from $SE in Brazil. I think that has proven to be directionally right, at least in terms of the heavier investment $MELI has had to make in its commerce business over the past few quarters.

To be clear, I do not think this investment is being made out of desperation. The results are clearly showing up. But I also do not think this was a purely voluntary investment cycle that would have happened at the same intensity regardless of the competitive backdrop.

The deterioration in NIMAL within the credit book has only added to the negative sentiment around the stock.

However, at ~$1,500, I do think the risk/reward is becoming very favourable again.

While I do think Chinese-linked e-commerce players like Shein, Temu, TikTok Shop, and Shopee will likely pressure industry take rates over time, Latin America remains a massive market and $MELI is still the clear structural leader.

What is most impressive is that lowering the minimum free shipping threshold has driven a sharp acceleration in GMV growth. Growing GMV ~38% YoY on a ~$70B annualised base is not normal. That is a sign the core marketplace still has a lot of latent demand, and that $MELI still has very powerful levers to pull when it chooses to reinvest.

I also think the fear around the fall in NIMAL is overstated.

Firstly, NIMAL at ~40% in Q3’24 was clearly unsustainably high. Nobody should have underwritten that as a steady-state number. Even at ~17.8% today, especially with the continued push into credit cards, this remains a very attractive return profile.

The key question is not whether NIMAL declines from peak levels. It was always going to. The real question is whether Mercado Pago can keep growing credit profitably while expanding the card base, deepening engagement, and avoiding a material blow-up in credit losses.

So far, I do not see evidence that the credit business is broken. I see a business normalising from abnormally high profitability while deliberately pushing into a product with a larger long-term opportunity but lower near-term economics.

The market seems to be treating the decline as if it signals structural impairment. I think it is more likely a mix of normalisation, mix shift, and reinvestment.

To be clear, the stock is not without risk. There is very strong competition to deal with. Take rates probably will compress. Shipping investments will continue to weigh on margins. Credit has to be watched closely.

Yet, $MELI is still the dominant commerce platform, the leading FinTech ecosystem, and one of the few companies in Latin America with the ability to compound across commerce, logistics, payments, credit, ads, and financial services at the same time.

This is clearly a business, with extremely capable management, going through an investment cycle. Will likely be adding to the stock in the very near future.

$80B for arguably the most important company in LatAm is cheap.