Mercado Ads Scales Up: Can it Become MELI's Third Growth Engine?
MercadoLibre MELI is expanding its ecosystem with increasing momentum in digital advertising, positioning Mercado Ads as a strong candidate for its next core growth engine. Mercado Ads helps sellers and brands reach millions of shoppers on and off MELI's platform using its first-party data for precise targeting. It offers Product Ads, Brand Ads, Display Ads and Video Ads, with Display and Video also shown outside MELI's ecosystem.Brand ads have seen strong growth after being expanded beyond top brands to more sellers. Display ads followed a similar path, growing more than 100% year over year in the first quarter of 2025. These gains are supported by new features like automated creative generation and improved analytics, which have made the ad tools more effective and widely accessible across the platform.The company took a bold step in the first quarter by launching Mercado Play, its TV streaming app, on more than 70 million smart TVs. With 15,000-plus hours of free content, the app targets a region where less than half the population pays for streaming, unlocking untapped ad inventory and creating value for users, content studios and Mercado Ads, especially in video.Now a $1 billion-plus annual revenue business, Mercado Ads grew nearly 50% year over year on an FX-neutral basis in the first quarter of 2025. Display ad revenues more than doubled, and its share of total ad revenues rose 10 percentage points year over year. Ad penetration increased across Brazil, Mexico and Argentina. MercadoLibre believes this is only the beginning of a much larger opportunity in Latin America's digital ad market.
As Latin America's digital ad market expands, Mercado Ads is facing stronger competition from global players like Amazon AMZN and Sea Limited SE. Both are stepping up efforts to capture ad spend in MELI's key markets.Amazon is growing its ad business in Brazil and Mexico, offering tools like Sponsored Products through its LATAM hub. With brand support and access to millions of Amazon shoppers, it's becoming a major draw for regional and global sellers.Shopee, backed by Sea Limited, is expanding in Latin America with new tools for brands and low-cost ad options. Focused on price-sensitive and mobile-first sellers, especially in Brazil, Sea Limited's Shopee's rising presence adds further pressure on MELI's hold over regional ad dollars.
MELI shares have gained 50.6% in the year-to-date (YTD) period, outperforming the Zacks Internet – Commerce industry and the Zacks Retail-Wholesale sector's growth of 5.7% and 2.8%, respectively.
Image Source: Zacks Investment Research
From a valuation standpoint, MELI stock is currently trading at a forward 12-month Price/Sales ratio of 4.20X compared with the industry's 2.01X. MELI has a Value Score of D.
Image Source: Zacks Investment Research
The Zacks Consensus Estimate for second-quarter 2025 earnings is pegged at $12.01 per share, which has remained steady over the past 30 days, indicating 14.60% year-over-year growth.
MercadoLibre, Inc. price-consensus-chart | MercadoLibre, Inc. Quote
The consensus mark for 2025 earnings is pegged at $47.75 per share, which has been revised downward by 1.9% over the past 30 days. The estimate indicates 26.69% year-over-year growth.MercadoLibre currently carries a Zacks Rank #3 (Hold). You can see the complete list of today's Zacks #1 Rank (Strong Buy) stocks here.
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The recent moving average crossover (50-day breaking above the 200-day) gives me encouragement that we could be at the beginning of a brand new uptrend. The stock is now consolidating recent gains. My bet would be that this is what sets up the next leg higher. DISCLOSURES: Ritholtz Wealth owns IEMG for client accounts All opinions expressed by the CNBC Pro contributors are solely their opinions and do not reflect the opinions of CNBC, NBC UNIVERSAL, their parent company or affiliates, and may have been previously disseminated by them on television, radio, internet or another medium. THE ABOVE CONTENT IS SUBJECT TO OUR TERMS AND CONDITIONS AND PRIVACY POLICY . THIS CONTENT IS PROVIDED FOR INFORMATIONAL PURPOSES ONLY AND DOES NOT CONSITUTE FINANCIAL, INVESTMENT, TAX OR LEGAL ADVICE OR A RECOMMENDATION TO BUY ANY SECURITY OR OTHER FINANCIAL ASSET. THE CONTENT IS GENERAL IN NATURE AND DOES NOT REFLECT ANY INDIVIDUAL'S UNIQUE PERSONAL CIRCUMSTANCES. THE ABOVE CONTENT MIGHT NOT BE SUITABLE FOR YOUR PARTICULAR CIRCUMSTANCES. BEFORE MAKING ANY FINANCIAL DECISIONS, YOU SHOULD STRONGLY CONSIDER SEEKING ADVICE FROM YOUR OWN FINANCIAL OR INVESTMENT ADVISOR. INVESTING INVOLVES RISK. EXAMPLES OF ANALYSIS CONTAINED IN THIS ARTICLE ARE ONLY EXAMPLES. THE VIEWS AND OPINIONS EXPRESSED ARE THOSE OF THE CONTRIBUTORS AND DO NOT NECESSARILY REFLECT THE OFFICIAL POLICY OR POSITION OF RITHOLTZ WEALTH MANAGEMENT, LLC. JOSH BROWN IS THE CEO OF RITHOLTZ WEALTH MANAGEMENT AND MAY MAINTAIN A SECURITY POSITION IN THE SECURITIES DISCUSSED. ASSUMPTIONS MADE WITHIN THE ANALYSIS ARE NOT REFLECTIVE OF THE POSITION OF RITHOLTZ WEALTH MANAGEMENT, LLC" TO THE END OF OR OUR DISCLOSURE. Click here for the full disclaimer.
