MercadoLibre (MELI) is one of those stocks that rarely looks “cheap” on a simple P/E screen and yet can still be meaningfully undervalued if you treat it like what it is: a dominant platform with multiple engines (commerce + payments + credit) and real operating leverage. The market tends to price it based on near-term noise, competition headlines, or macro jitters in Latin America. That’s exactly how high-quality compounders hand you opportunities.
Right now, the opportunity is pretty straightforward: MELI is back in gear technically, sentiment has improved, and the valuation is still not demanding for this caliber of business. At $2,297, the stock is still well below its 52-week high of $2,645.22 (hit on 07/01/2025), despite momentum that’s clearly shifted back to the upside.
My stance: MELI is top quality and still priced like the market hasn’t fully bought back into the durability of its growth and ecosystem. This is a mid-term (45 trading days) trade idea built around a continuation move toward prior highs, with a stop that respects where the trend would be objectively broken.
What the business is (and why the market should care)
MELI is often called “the Amazon of Latin America,” but that label undersells what makes the company strategically dangerous to competitors. It’s not just a marketplace. It’s an integrated stack that sits in the middle of commerce and money movement across Brazil, Argentina, Mexico, and a long tail of other countries.
The company’s own description is broad but telling: it provides the mechanism for buying, selling, and paying, plus tools for collecting and generating leads. That combination matters because ecosystems win by making the next product easier to adopt than the last. If you’re already selling on the platform, you’re more likely to use its payments rails. If you’re using the payments rails, credit is a natural next step. If you’re using credit, you’re increasingly “sticky.”
That’s why the market should care. When these loops work, you don’t just get growth. You get durable growth that can withstand pricing pressure and competitive noise better than single-product companies.
What the numbers say right now
Let’s start with scale and market confidence. MELI’s market cap is about $116.45B with an enterprise value around $117.43B. This isn’t a fragile small-cap story. It’s a large, liquid platform company with an established footprint and a deep bench (about 84,207 employees).
Profitability metrics reinforce the “quality” label. Return on equity sits at roughly 33.4%, with return on assets about 5.66%. High ROE can sometimes be financial engineering, so I also look at the cash profile: free cash flow is listed at roughly $8.61B, which is not a rounding error. The stock’s price-to-free-cash-flow is ~13.03 and price-to-cash-flow is ~11.41. For a business with clear platform advantages, those are not “bubble” numbers.
Valuation screens will flag the headline P/E near 54.0 and EV/EBITDA around 30.39. Fair. But those metrics can overstate “expensiveness” for businesses reinvesting heavily while scaling financial services. The more interesting anchor here is the price-to-sales around 4.28 (EV/sales ~4.48). For a platform with significant monetization potential, that’s a level that can work if the business continues executing.
Also worth noting: the balance-sheet liquidity ratios are not screaming “fortress.” Current ratio is about 0.90 and quick ratio ~0.88, while debt-to-equity is ~1.26. That’s not automatically bad for a scaled fintech-commerce hybrid, but it’s part of why you want a real stop-loss. The market will punish anything that looks like funding risk or credit-cycle trouble.
Market behavior and positioning
Technically, MELI is acting like a leader again. The stock at $2,297 is above its key moving averages:
- 10-day SMA: $2,124.26
- 20-day SMA: $2,113.64
- 50-day SMA: $2,060.28
- 21-day EMA: $2,117.64
Momentum indicators line up with that. RSI is 67.67 (strong, not yet obviously euphoric), and MACD is flagged as bullish_momentum with a positive histogram (~16.30). In plain English: buyers have control, and pullbacks are more likely to be bought than sold, until proven otherwise.
Short interest is not extreme. As of 12/31/2025, short interest was about 911,034 shares with ~2.2 days to cover. That’s not a squeeze setup, but it also tells you there isn’t a huge crowd leaning against the stock right now. This is more of a “re-rating” trade than a “trapped shorts” trade.
Valuation framing: why I still think it’s undervalued
“Undervalued” doesn’t have to mean single-digit P/E. For a company like MELI, undervaluation often shows up as the market underappreciating how resilient the flywheel is. The stock is still about 13% below the 52-week high ($2,645.22) while trading well above key trend lines. That’s a healthy setup for a continuation move if the market remains risk-on.
I also like that this is not priced like a hype-only story. A P/S of ~4.28 and P/FCF of ~13.03 is not how the market prices “peak optimism.” It’s how it prices a business it respects, but doesn’t fully trust to keep compounding without hiccups. When the market goes from “respect” to “trust,” multiples can expand even if growth simply stays solid.
What’s been driving attention (and could keep doing so)
Newsflow has skewed positive recently. On 01/21/2026, one piece highlighted an investment manager increasing a stake with a purchase around $51 million. And on 01/23/2026, MELI was called out as a candidate among “top stocks to double up on.” None of that guarantees anything, but it does reinforce that institutional and media narratives are leaning constructive, which matters for a mid-term trade.
Catalysts (what could push MELI higher from here)
- Trend continuation back toward prior highs. The stock is extended above its 20-day and 50-day averages, which often draws momentum and growth funds back in on pullbacks.
- Multiple expansion. If the market treats MELI more like a premium platform and less like a regional risk proxy, valuation could re-rate higher even without dramatic new fundamentals.
- Institutional sponsorship narrative. Visible additions by large managers can nudge other allocators off the sidelines, especially in a liquid, mega-cap style name like this.
- Technical breakout psychology. A clean push above the mid-$2,600s would put MELI in new-high territory relative to the last year, which often changes how investors talk about a name.
Trade plan (actionable)
This is a mid-term (45 trading days) setup. The reason for that horizon is simple: the stock already has momentum, but it’s also not a one-day scalp. A move back toward the prior high, or through it, typically needs a few weeks of market cooperation and a couple of orderly consolidations.
| Item | Level | Why it matters |
|---|---|---|
| Entry | $2297.00 | Current price with bullish MACD and price above key moving averages. |
| Target | $2645.22 | Retest of the 52-week high from 07/01/2025. Natural magnet for a trending leader. |
| Stop | $2058.00 | Just below the 50-day SMA (~$2060.28). A break there would damage the trend structure. |
Risk/reward is reasonable on paper: you’re risking roughly $239 per share to potentially make about $348 per share if the stock tags the prior high. More importantly, the stop is tied to a real technical line in the sand, not a random percentage.
If MELI can’t hold above its intermediate trend (around the 50-day), the “deeply undervalued quality compounder” narrative won’t matter in the short run. Price action will win that argument.
Risks and counterarguments (the stuff that can break the trade)
- Valuation compression risk. A ~54 P/E and ~30 EV/EBITDA gives the market room to punish the stock if sentiment turns or growth expectations cool.
- Balance sheet and funding perception. With current ratio ~0.90 and quick ratio ~0.88, the market may get jumpy if it starts worrying about liquidity or credit conditions.
- Macro and FX sensitivity. MELI operates across Brazil, Argentina, Mexico, and other countries. Shifts in currency or economic conditions can move results and investor appetite fast.
- Competitive intensity. E-commerce and fintech are not polite arenas. Price wars, subsidized shipping, or payments incentives can pressure margins and slow perceived momentum.
- Technical mean reversion. RSI near 68 signals strength, but also increases the odds of a sharp pullback if the broader market wobbles.
Counterargument to my thesis: the simplest bear case is that MELI isn’t undervalued at all, it’s just “fully priced quality.” If the market decides it prefers lower-multiple names, or if platform multiples compress broadly, MELI can tread water even while the business performs. In that scenario, paying up for “quality” doesn’t help your 45-trading-day window.
Conclusion: my stance and what would change my mind
I like MELI here. You’re looking at a stock with clear bullish momentum, strong profitability signals (ROE ~33.4%), meaningful free cash flow (~$8.61B), and a valuation profile that’s not insane for a dominant platform (P/S ~4.28, P/FCF ~13.03). The market has started to reprice it higher, but it hasn’t pushed it back to its prior high yet. That’s the opportunity.
I’d change my mind if the stock loses the intermediate trend and stays below it. Specifically, a decisive breakdown through the low-$2,060s region would tell me this move was more bounce than trend, and I wouldn’t want to argue with that. On the upside, a clean run toward $2,645.22 is the base case target. If it reaches that level quickly on heavy momentum, then we reassess whether the next leg is a breakout trade or a sell-into-strength moment.