Shopee vs MercadoLibre Stock: Which Is Best?

Shopee vs MercadoLibre Stock: Mature economies have been moving towards e-commerce for more than a decade.

In 2013, e-commerce accounted for just under six percent of total retail sales in the United States. By 2021, that figure had more than doubled, and analysts expect e-commerce to make up nearly 22 percent of retail sales in the US by 2025.

Meanwhile, in China, more than 46 percent of sales take place online, and in England, e-commerce makes up more than a quarter of retail sales.

Countries like the United States, Australia, Great Britain, China, Japan, and members of the European Union were able to embrace e-commerce more rapidly than nations in South America, Africa, and some parts of Asia.

That was due, in part, to the fact that developed countries had reliable internet connections sooner than their emerging peers, and they saw widespread adoption of smart devices as soon as those devices rolled out. More importantly, they had a robust middle class with cash to spend on non-essentials.

Latin America has been somewhat behind the United States and other developed nations when it comes to e-commerce. However, all of that is starting to change. The Latin American middle class is growing, and the internet has been far more accessible for average Latin American consumers.

How Big Is The Latin American E-Commerce Market?

From an e-commerce perspective, these are the top six Latin American countries for 2021:

• Argentina – $18 billion in e-commerce sales

• Brazil- $153 billion in e-commerce sales

• Chile – $15.65 billion in e-commerce sales

• Colombia – $22.4 billion in e-commerce sales

• Mexico – $48.6 billion in e-commerce sales

• Peru – $13 billion in e-commerce sales

All six of these countries are expected to see substantial growth in e-commerce sales by 2025. Growth by country is projected to be:

• Argentina – 32 percent

• Brazil – 22 percent

• Chile – 19 percent

• Colombia – 26 percent

• Mexico – 24 percent

• Peru – 21 percent

That growth has interested major e-commerce companies, and many are moving into the Latin American market. Amazon is especially focused on capturing Latin American consumers, but it is up against heavy competition.

For example, Singapore’s Shopee (under parent company Sea Limited) has its eye on South America – and Shopee has Sea Limited’s profitable gaming business to back it up.

On top of that, Latin America has its own e-commerce companies, and they have a competitive edge because they are specifically designed to meet the needs of Latin American consumers.

MercadoLibre is the best-known, and investors are starting to wonder if it can withstand the competition from international rivals. Many ask whether they should place their bets on Shopee or MercadoLibre stock. In other words, Shopee vs. MercadoLibre stock: Which is best?

Is MercadoLibre Stock A Buy?

All of the world’s e-commerce companies saw a drop in sales when the threat of COVID finally eased. Some consumers returned to brick-and-mortar stores, and others lost interest in shopping when travel, restaurants, and entertainment venues were once again open for business.

MercadoLibre stock is down approximately 34 percent year-to-date in 2022, and shares are trading nearly 55 percent lower than they were a year ago.

However, it appears the company is on the road to recovery. In June, MercadoLibre stock hit rock-bottom at roughly $600 per share, but then the tide turned, and share prices started to climb.

The fact is that MercadoLibre (NASDAQ:MELI) has a hold on the Latin American e-commerce market, and despite recent setbacks, it is well-positioned to prosper long-term. In addition to its auction site, MercadoLibre allows merchants to set up storefronts.

On top of that, it has a lucrative financial services business that is meeting an essential need for Latin American consumers who are predominantly unbanked.

MercadoLibre’s growth since its 2007 IPO is remarkable. Revenues went from a mere $52 million in 2006 to a total of $6.1 billion in 2021.

MercadoLibre’s market cap currently exceeds $44 billion, which pales in comparison to Amazon’s $1.33 trillion. Sea Limited, parent to Shopee, is notably smaller, with a market cap of less than $36 billion.

At the end of 2021, MercadoLibre reported 140 million unique active users and more than a billion items sold. MercadoLibre controls around 25 percent of the Latin American e-commerce market, which is expanding rapidly. Overall, analysts agree that MercadoLibre stock is a buy, with some even going so far as to say MercadoLibre stock is a strong buy.

Can Shopee Compete In Latin America?

For the month of April 2021, MercadoLibre had 668 million monthly visits, compared to Amazon’s 169 million visits in the Latin American market. Americanas came in third with nearly 130 million visits, and Casas Bahia had around 83 million visits. Shopee was a distant fifth with less than 41 million visits.

Those figures started to shift by August 2021, and by the end of the year, it became clear that Shopee was a formidable opponent. However, there are two reasons why analysts aren’t concerned, and MercadoLibre investors don’t have to worry.

First, the market is large enough for more than one e-commerce company. Even Amazon has competitors in the United States.

Healthy competition ensures better service, more innovation, and higher quality for consumers, so Shopee’s presence in Latin America may push MercadoLibre to achieve more than it might have otherwise. No matter what happens, consumers are likely to come out on top in the end.

Second, Shopee has a standard playbook when it expands into new markets. It brings customers in through deep discounts and incentives, which it can afford thanks to subsidies from Sea Limited’s gaming revenues.

When the discounts and incentives stop, customer churn starts – and many of those customers are likely to go back to MercadoLibre.

MercadoLibre vs. Sea Limited Stock: Which Is Best?

The question of MercadoLibre stock vs Sea Limited stock isn’t an apples-to-apples comparison. It comes down to individual goals. If investors want exposure to the Latin American market, MercadoLibre is the best choice based on the depth and breadth of its product line and its expansive connection with Latin American consumers.

Sea Limited may be the better choice if the goal is to get into high-growth tech stocks. It has exposure to e-commerce, is moving into emerging markets, and has a wildly successful gaming division.

Both companies have fintech segments, which have been popular in their home markets and may drive profits long-term. Ultimately, either or both of these stocks are a smart choice for an otherwise diversified portfolio.

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