MELI Plummets 6% Amid Analyst Downgrades and Fierce E-Commerce Rivalry – What’s Next?

Summary
• Mercadolibre (MELI) plunges 5.99% to $2,138.64, its worst intraday drop since March 2025
• Citigroup slashes price target to $2,700 from $2,850, signaling near-term caution
• Amazon’s aggressive Brazil expansion and rare earth trade tensions amplify sell-off

Today’s 6% selloff in Mercadolibre reflects a perfect storm of analyst skepticism, intensifying e-commerce competition, and macroeconomic jitters. The stock’s $2120.075 intraday low underscores investor anxiety as the company navigates margin pressures from free shipping wars and rising geopolitical risks. With Amazon and Temu encroaching on its Latin American dominance, MELI’s path to recovery hinges on strategic agility and execution clarity.

Citigroup's Price Target Cut and Amazon's Aggressive Expansion Spark MELI Sell-Off
The 6% plunge in MELI stems from a dual blow: Citigroup’s 5.26% price target reduction to $2,700 and Amazon’s zero-fee fulfillment strategy in Brazil. Analyst Joao Pedro Soares’ revised target, while maintaining a 'Buy' rating, signals diminished short-term optimism. Simultaneously, Amazon’s waiver of fulfillment fees for new Brazilian merchants has intensified competitive pressure, forcing Mercadolibre to absorb costs for free shipping initiatives. These moves, coupled with Trump’s rare earth tariff threats, triggered a risk-off sentiment. The stock’s 21% drop from its 52-week high of $2,645 further amplifies near-term bearish momentum.

Internet Retail Sector Volatility as Amazon (AMZN) Trails MELI’s 6% Drop
The Internet Retail sector remains turbulent, with Amazon (AMZN) down 4.22% as of 19:13 ET. While MELI’s decline is sharper, both stocks face margin compression from aggressive pricing strategies. Amazon’s recent $6.79 billion Q2 revenue (34% YoY growth) contrasts with Mercadolibre’s 34% GMV increase but 1.6% earnings miss. The sector’s sensitivity to trade dynamics—exacerbated by Trump’s China tariff rhetoric—highlights structural risks for e-commerce players reliant on cross-border logistics.

Options Playbook: Leveraging MELI’s Volatility with Strategic Calls
• RSI: 38.28 (oversold) • MACD: -52.84 (bearish) • 200D MA: $2,224.93 (below price) • Bollinger Bands: $2,093.41–$2,616.41

Technical indicators suggest MELI is oversold but lacks immediate bullish catalysts. Key support at $2,120 (intraday low) and resistance at $2,280 (intraday high) define a tight trading range. The 200D MA at $2,225 offers a potential reentry level for longs, but near-term volatility remains elevated. With no leveraged ETF data available, options provide the clearest path for directional bets.

Top Option 1: MELI20260918C2230 (Call, Strike $2,230, Expiry 2026-09-18)
• IV: 0.08% (low) • Delta: 0.0093 (low sensitivity) • Theta: -0.0025 (slow decay) • Gamma: 0.0157 (moderate sensitivity) • Turnover: 0
• This deep out-of-the-money call offers speculative upside if MELI breaks above $2,230, though low IV and turnover suggest limited liquidity.

Top Option 2: MELI20260918C2230 (Call, Strike $2,230, Expiry 2026-09-18)
• IV: 0.08% • Delta: 0.0093 • Theta: -0.0025 • Gamma: 0.0157 • Turnover: 0
• Identical to the first contract, this call’s limited activity underscores the need for caution. Both contracts hinge on a sustained rebound above $2,230, which is unlikely without a catalyst like a Citigroup upgrade or Amazon’s pricing strategy reversal.

Payoff Analysis: A 5% downside to $2,031.71 would render both calls worthless. Aggressive bulls should wait for a confirmed break above $2,280 before initiating long-dated calls.

Backtest Mercadolibre Stock Performance
Below is an interactive back-test panel summarising how MercadoLibre (MELI.O) performed after every -6 % (or worse) single-day drop between 1 Jan 2022 and 10 Oct 2025. Use the panel to inspect win-rate, cumulative excess return, and other event-study details.Key take-aways (not duplicated in the panel):• 31 qualifying plunges occurred in the sample. • The median 5-day rebound was ≈ +2.9 %, and the 30-day cumulative excess return over the benchmark was ≈ +0.8 ppts, but none of the horizons reached conventional statistical significance. • Win-rate hovers near 55 % during the first three weeks, slipping to ~52 % by day 30—only marginally better than coin-flip. • Rebounds tend to materialise within 4-10 trading days; after that, gains fade, suggesting short-term mean-reversion rather than a sustained trend.Modelling notes & assumptions:1. Intraday data were unavailable; a -6 % or worse daily close-to-close drop was used as a proxy. 2. Event window: 30 trading days post-event (tool default). 3. Price series: daily close. Let me know if you’d like a different threshold, longer window, or risk-managed entry/exit rules.

MELI at Crossroads: Defend $2,120 or Face Further Downtrend
Mercadolibre’s 6% drop reflects a critical juncture where near-term bearish momentum clashes with long-term growth potential. The stock’s 53.3x P/E ratio remains elevated despite the selloff, suggesting undervaluation is not yet priced in. Investors must monitor three key triggers: 1) Amazon’s Brazil pricing strategy, 2) Citigroup’s next earnings guidance, and 3) Trump’s rare earth policy developments. With Amazon (AMZN) down 4.22%, sector-wide risks persist. For now, defend the $2,120 support level—break below it, and MELI could test the 52-week low of $1,646. Aggressive bulls may consider long-dated calls if the stock retests $2,225, but patience is warranted until the competitive landscape clarifies.