Down 38%, Is MercadoLibre Stock a Better Buy than SpaceX and the "Magnificent Seven" Stocks in November?
MercadoLibre is growing faster than nearly all of them, but it's stock has plunged this year.
The Magnificent Seven stocks, consisting of Nvidia, Apple, Amazon, Alphabet, Microsoft, Meta Platforms, and Tesla, are known for their stability and potential in the market. However, smaller stocks like MercadoLibre (MELI -0.87%) could offer greater growth opportunities. MercadoLibre has recently dropped 38% from its highs, yet it demonstrates impressive growth metrics.
In the second quarter, the company's revenue surged 50% year over year, its fastest growth rate in nearly four years, despite challenging economic conditions with high inflation in the 18 countries it serves. MercadoLibre's gross merchandise volume increased by 44% compared to the previous year, and they ship 78% of shipments within 48 hours.
Additionally, unique active buyers rose by 26%, and total payment volume climbed by 56% year over year. The company operates in Latin America, where e-commerce penetration and digital finance are still developing, providing significant growth potential over the long term. MercadoLibre's ecosystem, which combines commerce and finance, creates a "flywheel" effect, with each component strengthening the other.
This flywheel is evident in various metrics, such as the increase in items per buy by 14% year over year and the highest-ever ratio of daily active buyers to monthly active buyers. While profitability has faced pressure due to ongoing investments, MercadoLibre's strategy focuses on enhancing its existing business and capturing market share.
The company recently lowered its free shipping threshold in Brazil from R$79 to R$19, which increases shipping costs but solidifies its position in the largest market. Management believes that bold investments today are essential to seize the long-term opportunity. Given its impressive growth metrics and focus on expanding its ecosystem, MercadoLibre appears to be a better buy than the more established Maginificent Seven stocks, including SpaceX and the other six tech giants, for investors looking for potential in November.
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