MELI Stock is Crashing - Here's Everything You Need to Know

Daniel Pronk•Feb 25, 2026

Summary

Daniel provides a comprehensive analysis of Mercado Libre's (MELI) fourth-quarter earnings, focusing on the divide between stellar business performance and a negative market reaction. He explains that while the stock dropped due to margin compression, the underlying business saw revenue growth accelerate to 45% year-over-year. Daniel's thesis is that Mercado Libre is intentionally reinvesting profits into initiatives like lower free shipping thresholds and credit portfolio expansion to widen its competitive moat in Latin America. He views the resulting 30% share price correction as a result of short-term analyst thinking rather than a reflection of the company's intrinsic value.

Looking ahead, Daniel sees massive underpenetration in the Latin American e-commerce and fintech markets as a long-term tailwind. He highlights that fewer than one-third of Brazilian adults currently shop on the platform, suggesting a long runway for growth. Daniel uses a DCF analysis to project a fair value of $3,000 per share and a five-year price target of $4,900, representing a 23% compounded annual growth rate from current levels. He argues that at 7.2 times gross profit, the stock is trading at levels not seen since the 2009 financial crisis.

Mercado Libre (MELI): Daniel is highly optimistic, citing 45% revenue growth and a 90% increase in the credit portfolio as evidence of an exploding business. He notes that while margins were hit by strategic investments, the logistics network is becoming more efficient with unit shipping costs falling by 11% in Brazil. Daniel emphasizes that he is actively buying more shares, valuing the company at approximately 14 times its free cash flow potential of $6.2 billion.

Home Depot (HD): Daniel mentions Home Depot briefly to illustrate what he perceives as a market disconnect. He notes that the stock rose 3% despite a decline in revenue and earnings, while trading at a high multiple of 27 times earnings. He views such stocks as expensive and uses them as a contrast to high-growth businesses like MELI that are currently being penalized by investors.

Mentioned Stocks

Sentiment: SELL

Reasoning: Daniel uses Home Depot as an example of an expensive stock with poor fundamentals, noting that it trades at 27 times earnings despite a decline in revenue and earnings. He views it as part of a market trend where overpriced, low-growth businesses are performing better than high-growth companies for unjustified reasons.

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MELI

Sentiment: BUYAction: BOUGHT

Reasoning: Daniel highlights the 45% revenue growth and the fact that management is prioritizing long-term moat building over short-term margin optimization. He believes the stock is an 'absolute steal' at 7.2x gross profit and 14x his adjusted free cash flow potential. He provides a fair value estimate of $3,000 per share and a 5-year price target of $4,900.

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