1 Unstoppable Growth Stock to Buy With $3,000

Globe and Mail

11 hours ago

Key Points
MercadoLibre is the leading e-commerce player in Latin America.
The company delivers excellent results and has strong growth prospects.
Despite some potential challenges, the stock should produce above-average returns.
10 stocks we like better than MercadoLibre ›
MercadoLibre (NASDAQ: MELI), an e-commerce specialist based in Latin America, has been on fire this year, with the company's shares up by 35% since early January. That's despite the significant uncertainty and volatility stocks have experienced, which suggests that the market is impressed with MercadoLibre's financial results or prospects (or both). The market is right. MercadoLibre is firing on all cylinders and still boasts an excellent long-term outlook. The stock is not cheap -- shares are changing hands for just under $2,477 apiece. But for those who have that kind of money to invest, here is why putting it to work with MercadoLibre would be a brilliant move.
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Firing on all cylinders
Several companies tried to dominate the e-commerce market in South America, including Amazon. However, MercadoLibre reigns supreme. The company's position in this region grants it a significant advantage. MercadoLibre has a deep footprint across South America, allowing it to service consumers across borders. That sounds like a logistical nightmare, but MercadoLibre has figured it out. Eating into the company's market share won't be easy for newcomers.
Furthermore, although it is known as an e-commerce leader, MercadoLibre also operates a business that enables merchants to establish online storefronts and a fintech unit. This suite of complementary products grants MercadoLibre a strong moat via the network effect and switching costs. Recent financial results have been strong, but it's worth pointing out that MercadoLibre has been delivering excellent revenue growth for years and is now consistently profitable.
MELI Revenue (Annual) data by YCharts
Perhaps one more thing attracting investors to MercadoLibre these days is that, since the company operates in South America, it won't be directly impacted by President Trump's tariffs, unlike several U.S.-based e-commerce giants. MercadoLibre could still be affected by macroeconomic factors, such as price increases or a downturn, but it is better positioned than many of its peers to handle Trump's aggressive trade policies. That's worth quite a bit in today's market.
The future looks incredibly bright
What do MercadoLibre's long-term prospects look like? In my view, much like its past. The company's leadership in Latin America positions it ideally to profit as e-commerce continues to gain momentum. That could last a long time: Retail sales are projected to continue moving online, given the convenience they offer. According to Grand View Research, the e-commerce market in South America will expand at a compound annual growth rate of 16.7% through 2030.
Another thing that would be a tailwind for MercadoLibre, even without its industry expanding as rapidly, is the growing middle class in Latin America. That means more discretionary income and spending on retail transactions of all types, including e-commerce. Of course, more online transactions will also help fuel MercadoLibre's other segments, including its fintech unit. All of that points to massive long-term opportunities for MercadoLibre. The company won't be without its risks.
Though it has managed to fend off competition so far, it will likely only intensify over the long run. Shopee, an e-commerce platform owned by Sea Limited, a successful, Singapore-based tech company, has been making headway in Latin America. It helps to have that kind of backing when looking to challenge a giant like MercadoLibre. Further, shares of the Latin America e-commerce king don't look cheap. The company's forward price-to-earnings of 46.5 is well above the average for the consumer discretionary sector of 28.
Even with these caveats in mind, MercadoLibre's prospects look attractive. The company's valuation might make it volatile in the short run, but it won't matter a whole lot to investors looking to hold on to its shares for five years or more -- a period in which, in my view, the stock will outperform the market. Even with mounting competition, MercadoLibre will likely remain a leader thanks to its competitive edge. Amazon eventually dealt with stiff competition but remained massively successful while delivering life-changing returns to loyal investors over the long run.
MercadoLibre can do the same. The stock is well worth buying today, despite its significant gains this year.
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