Is MercadoLibre Still a Buy After Strong Growth and Fintech Expansion?

The question of whether MercadoLibre (MELI) remains a compelling investment hinges on reconciling its elevated valuation metrics with the robust growth underpinning its fintech and e-commerce operations. As Latin America's dominant digital commerce and financial services platform, MercadoLibre has long been a poster child for high-growth tech stocks. Yet, with a trailing price-to-earnings (P/E) ratio of 50.39 and a forward P/E of 40.41-180% above the Consumer Cyclical sector average of 17.93-investors must scrutinize whether these multiples are justified by fundamentals. This analysis explores the tension between MercadoLibre's current valuation and its long-term growth potential, particularly in its fintech division, to assess its investment appeal.

Valuation Metrics: A Tale of Two Narratives

MercadoLibre's valuation appears stretched by traditional metrics. Its price-to-sales (P/S) ratio of 4.01 is 47% above the industry average of 2.09, while its enterprise value-to-EBITDA (EV/EBITDA) ratio of 28.78, though deemed "fairly valued" by some analysts, still reflects a premium to historical benchmarks according to analysts. These figures suggest skepticism about the sustainability of MercadoLibre's growth. However, the company's financial performance in 2025 complicates this narrative. Revenue grew by 39.48% year-over-year, driven by a 49% increase in fintech revenue to $3.2 billion in Q3 2025 alone. Such growth, coupled with margin expansion, has led some analysts to argue that the high multiples are warranted by the company's ability to monetize its expanding user base and financial services ecosystem.

The apparent contradiction between these valuation signals and the company's growth is further muddied by a discounted cash flow (DCF) analysis. A 2025 DCF model estimates MercadoLibre's intrinsic value at $2,888.38 per share, implying the stock is undervalued by 29.1% according to the model. This discrepancy arises from the model's assumptions: a 10% discount rate, a 16% compound annual growth rate (CAGR) in revenue from 2024 to 2034, and EBIT margin expansion from 13% in 2025 to 20% by 2034 according to the analysis. These projections hinge on the belief that MercadoLibre can sustain its fintech-driven growth while improving operational efficiency-a bet that may or may not pay off.

Fintech Expansion: A Double-Edged Sword

MercadoLibre's fintech division, led by Mercado Pago, is the linchpin of its growth strategy. The platform's credit portfolio surged by 83% year-over-year to $11.0 billion in Q3 2025, with the credit card portfolio alone expanding by 104% to $4.8 billion according to financial reports. These figures underscore Mercado Pago's dominance in Latin America, where it now serves 72 million monthly active users-a 29% increase from the prior year. The company's foray into Argentina, a market where over 60% of adults lack a credit card, further highlights its ambition to capture untapped demand according to market analysis.

Yet, this aggressive expansion comes at a cost. MercadoLibre's net margin contracted to 5.68% in Q3 2025, reflecting the operational challenges of scaling financial services in emerging markets according to financial data. While this margin compression is a short-term drag, the long-term payoff could be significant if Mercado Pago's user base continues to grow and cross-sell into higher-margin services like loans and insurance. The key question is whether the company can balance its growth imperative with profitability-a challenge it has historically navigated with mixed success.

Reconciling Valuation and Growth

The DCF model's optimistic outlook rests on the assumption that MercadoLibre's fintech expansion will drive durable revenue growth and margin improvement. However, the company's current valuation metrics suggest that the market is already pricing in a significant portion of these future gains. For instance, the forward P/E of 40.41 implies that investors expect earnings to grow at a rate that outpaces the 16% CAGR assumed in the DCF model. If MercadoLibre fails to meet these expectations-whether due to regulatory headwinds, competitive pressures, or macroeconomic shocks-the stock could face downward pressure.

Conversely, if the company executes on its strategic priorities-expanding its logistics network, deepening fintech penetration, and leveraging its scale to reduce costs-the DCF model's intrinsic value could prove conservative. The recent launch of a credit card in Argentina, for example, opens a new revenue stream in a market with limited financial inclusion, potentially accelerating user growth and cross-selling opportunities. Similarly, MercadoLibre's logistics investments, which underpin its e-commerce dominance, could further solidify its competitive moat by reducing delivery times and enhancing customer satisfaction.

Conclusion: A High-Risk, High-Reward Proposition

MercadoLibre's investment case remains a study in contrasts. On one hand, its valuation metrics are lofty by historical and sector standards, raising concerns about overvaluation. On the other, its fintech expansion and operational momentum suggest that these multiples may be justified by the company's long-term potential. The DCF model's undervaluation estimate adds another layer of complexity, implying that the market has not fully priced in MercadoLibre's future cash flows.

For investors, the decision to buy or hold MercadoLibre hinges on their risk tolerance and time horizon. Those who believe in the company's ability to sustain its growth trajectory and improve margins may find the current valuation compelling, particularly given the DCF model's intrinsic value. However, those wary of the company's margin pressures and the inherent risks of high-growth tech stocks may prefer to wait for a more attractive entry point. In a market where fintech and e-commerce are reshaping Latin America's economy, MercadoLibre's future is as uncertain as it is promising.