Finding stocks that might provide the fabled 10x return under “real world” circumstances is difficult, but not impossible. One such stock may well be MercadoLibre (whose name means “free market”).
The company operates online marketplaces all over Latin America, with a user base of around 140 million, making it the most popular e-commerce site in the region.
MercadoLibre’s reach extends as far as Spain, where it operates sites dedicated to real-time online auctions and other e-commerce concerns, in addition to its own MercadoLibre.com.
Millions of Users, 20+ Year Track Record
MercadoLibre isn’t just an auction site or a web services platform. For starters, its millions of users and customers make it one of the biggest online processors of electronic payments in Latin America.
It does offer web services but enhances those services with a broad offering of supply chain and logistics support, digital marketing resources including tools that users can use directly, and even provides access to credit.
Though many may not initially think of MercadoLibre as a Latin American fintech giant, that’s precisely what the Buenos Aires-headquartered company is. Its first foray into fintech could be said to be its MercadoPago platform. MercadoPago, or “MarketPage,” launched almost twenty years ago and has been a resounding success.
MercadoPago is a dedicated digital payment platform for both consumer-level transactions as well as for B2B payments. When it launched in 2003, it was initially intended to serve primarily as nothing more than an integrated online payment solution for MercadoLibre.com customers. Its scope is quite a bit larger now.
Less Than 50% Of Latin Americans Have Bank Accounts
MercadoPago alone processed approximately 3.3 billion transactions in 2021, up almost 70% more than the previous year, owing mainly to the pandemic driving commerce online in Latin America.
Lockdowns pushed billions of dollars of transactions online globally, of course, but the effect in Latin American countries, particularly hard hit, was marked.
This region is well known to have high numbers of unbanked people. On the whole, fewer than half of all Latin Americans over the age of 14 have bank accounts, and the number is even lower for debit card adoption.
With the increased need for online payment and other financial services due to the pandemic, MercadoPago provided the service the Latin American people didn’t think they would ever need. A “cash basis” culture was suddenly forced to transition to e-commerce as a replacement for real-world transactions that otherwise would have been processed face to face.
Payment volume on MercadoPago increased over 55% to $77.4 billion in 2021. The number of “off-market” transactions, or direct transactions between debtor and payee not involving MercadoLibre, more than doubled. The total payment volume of these transactions alone amounted to $10.33 billion.
MercadoLibre: An Online Ecosystem
MercadoLibre comprises five main entities. In addition to MercadoLibre and MercadoPago, the company’s MarketPlace platform functions as a buyer-to-seller auction or direct market, much in the way that eBay does in the US.
It also provides a home to over 3,000 official brands to conduct business directly with consumers. MercadoShops is a platform for anyone who wishes to maintain an online seller presence, similar to Amazon’s Seller services.
Its fifth division is Mercado Crédito, the company’s fintech division, a regulated bank in its own right that provides services similar to that of its US competitor SoFi.
Mercado Credito is available in Argentina, Brazil, Mexico, and Chile. It currently has around eight million consumers making payments on active loans.
Mil Por Ciento: 1,000% Returns?
For the benefit of readers who don’t speak Spanish, mil por ciento is “one thousand percent” in English, and MercadoLibre looks like it might be an opportunity to experience the 10x phenomenon firsthand.
In 2021, MercadoLibre’s revenue climbed to $7.1 billion, an increase of over 78% on the previous year’s numbers.
Forecasts indicate that online retail sales across the region will increase at around 18% annually, reaching $138 billion by as early as 2024, along with increased adoption of mobile apps as an option to pay for items in person.
MercadoLibre is poised to not only continue its recent successes but to increase upon them. The Latin American fintech titan is currently valued at $45 billion. In ten years, it could easily be worth ten times that—or more.
Unlike GameStop, which was driven up by a large group of amateur traders, who sparked a short covering rally that catalyzed GME to rise from a few dollars per share to $400 per share, Mercadolibre has the potential to 10x by fundamentals alone.
Over the last 5 years, it’s already grown top line sales by almost 5x but it’s just getting started. A forecasted growth rate of 18% per year for online retail sales in LatAm combined with digital wallets representing 31% of online payments, should collectively spur Mercadolibre to capture ever more sales. It’s not a stretch to imagine this company captures half a trillion dollar valuation over the next decade, which would result in a 10x increase from current levels.
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