Mercadolibre Plummets 3.67%: Can Growth Justify the Selloff?

Summary
• Mercadolibre (MELI) gaps down 3.67% intraday to $2070.99, erasing $79 billion in market cap since the 2025 peak.
• Q3 net revenue surged 39% YoY to $7.4B but margins collapsed to 9.8% from 12.9% amid aggressive free shipping and credit investments.
• Latin American e-commerce is projected to hit $3.26T by 2030, yet MELI trades at a forward P/E of 42.28, PEG 1.35.

Today’s selloff reflects a critical inflection point for Mercadolibre. The stock’s 3.67% drop—its largest intraday decline since 2023—highlights the tension between explosive growth and margin compression. With 77 million active buyers and a $110B market cap, the company’s ability to stabilize economics while defending its Latin American dominance will define its next chapter. The sector’s broader volatility, including Amazon’s -1.81% decline, underscores the competitive pressures reshaping e-commerce fundamentals.

Margin Compression and Competitive Pressures Drive Sharp Selloff
Mercadolibre’s intraday plunge stems from a perfect storm of margin erosion and intensifying competition. Q3 results revealed a 39% revenue surge to $7.4B but a 9.8% operating margin—down from 12.9%—as the company poured $13B into logistics and credit services to counter Shopee and Temu. This aggressive reinvestment, while boosting 26% YoY active buyer growth to 77 million, has strained profitability. The forward P/E of 42.28 and PEG of 1.35 now demand flawless execution to justify the valuation. Meanwhile, Amazon’s -1.81% decline signals broader sector jitters, as e-commerce platforms grapple with rising capital intensity and regulatory scrutiny.

E-Commerce Sector Volatility: Amazon's Mixed Performance Highlights Sector Dynamics
The e-commerce sector remains a battleground of growth and margin pressures. Amazon’s -1.81% decline mirrors MELI’s struggles, as both face rising logistics costs and regulatory headwinds. While Amazon’s $2.6T market cap offers scale advantages, its recent dip reflects investor skepticism about profit sustainability in a low-margin environment. Mercadolibre, by contrast, trades at a premium to its fundamentals, with a forward P/E of 42.28 versus Amazon’s 38.5. This premium hinges on MELI’s ability to monetize its 77 million active buyers and expand into fintech, but the path to margin stabilization is fraught with competition from Shopee and Temu, which are forcing aggressive price wars in Latin America.

Technical Divergence and ETF Strategy: Navigating a Volatile Play
• MACD: 29.74 (bullish), Signal Line: 6.97 (bearish), Histogram: 22.77 (divergence)
• RSI: 70.96 (overbought), Bollinger Bands: 2220.00 (upper), 2040.88 (middle), 1861.75 (lower)
• 200D MA: 2269.63 (bearish), 30D MA: 2051.63 (neutral)
• Support/Resistance: 2013.75–2019.17 (short-term), 2384.34–2400.72 (long-term)

The technicals paint a mixed picture. While the MACD histogram shows bullish momentum, the RSI at 70.96 suggests overbought conditions, and the 200D MA at 2269.63 looms as a critical resistance. The stock is trading near the lower Bollinger Band at 1861.75, hinting at potential mean reversion. Short-term traders should watch the 2013.75 support level; a break below could trigger a test of the 52W low at 1723.90. For ETFs, the Burney U.S. Factor Rotation ETF (BUFR) has added MELI to its portfolio, betting on its long-term e-commerce tailwinds. However, the lack of leveraged ETF data complicates direct exposure. Given the options chain is empty, focus remains on technical levels and sector rotation plays.

Backtest Mercadolibre Stock Performance
The backtest of MELI's performance after an intraday plunge of at least -4% from 2022 to the present shows favorable short-to-medium-term gains. The 3-Day win rate is 50.80%, the 10-Day win rate is 52.52%, and the 30-Day win rate is 55.31%, indicating a higher probability of positive returns in the immediate aftermath of such events. The maximum return during the backtest was 6.21% over 30 days, suggesting that MELI can offer decent gains even after significant volatility.

Critical Inflection Point: Watch for Margin Stabilization or Breakdown
Mercadolibre’s 3.67% selloff signals a pivotal moment for the stock. The company’s ability to stabilize margins while maintaining 30%+ revenue growth will determine whether the current valuation is justified. Investors should monitor the February 19 earnings report for clues on unit economics and capital efficiency. In the near term, a breakdown below 2013.75 support could accelerate the decline toward the 52W low, while a rebound above the 200D MA at 2269.63 would validate the long-term growth narrative. The sector leader, Amazon (-1.81%), offers a cautionary tale about profit sustainability in a competitive landscape. For now, the path of least resistance appears bearish, but the Latin American e-commerce boom remains a powerful tailwind—if Mercadolibre can execute.