Mercadolibre Plummets 5.4%: What's Behind the Sudden Selloff?

Summary
• MELI drops 5.4% to $1,963.28, its lowest since October 2024
• 52-week range of $1,646–$2,645 highlights 26% bearish gap
• DCF analysis suggests 29% undervaluation vs. current price

Today’s sharp selloff in Mercadolibre (MELI) has sent shockwaves through the internet retail sector. The stock’s 5.4% decline—its worst intraday performance since the 2024 earnings slump—has triggered a 70-point drop below its 50-day moving average. With the company’s recent $750 million bond offering and regulatory scrutiny in Brazil and Mexico dominating headlines, investors are scrambling to decipher whether this is a buying opportunity or a warning sign. The stock’s 4.5% drop has erased $10 billion in market cap, raising urgent questions about its fintech expansion strategy and competitive positioning.

Fintech Expansion and Regulatory Scrutiny Weigh on MELI
Mercadolibre’s selloff stems from a confluence of factors: its recent $750 million bond offering at 4.9% coupons, regulatory headwinds in Brazil and Mexico, and a bearish technical setup. The company’s aggressive fintech expansion—now accounting for 35% of revenue—has drawn scrutiny from regulators concerned about market dominance. Meanwhile, the bond issuance, while funding logistics and payment infrastructure, has spooked investors about leverage. The stock’s 5.4% drop follows a 2.0% weekly decline, with analysts noting the move reflects a shift from growth optimism to caution. The 52-week low of $1,646 looms as a critical psychological level.

Internet Retail Sector Mixed as Amazon Gains Momentum
While MELI tumbles, Amazon (AMZN) rises 1.24%, outperforming the sector. The internet retail index is flat, with Sea Limited (SE) down 2.12% and DoorDash (DASH) falling 3.6%. Amazon’s strength highlights divergent investor sentiment: MELI’s fintech-driven model faces regulatory risks, while Amazon’s diversified e-commerce and cloud infrastructure offer perceived stability. The sector’s mixed performance underscores the market’s bifurcation between high-growth fintech plays and established logistics leaders.

Options Playbook: Navigating MELI’s Volatility
• MACD: -19.90 (bearish divergence), Signal Line: -31.77, Histogram: +11.87 (short-term bearish)
• RSI: 51.30 (oversold territory)
• Bollinger Bands: $1,946.24 (lower band) vs. current $1,963.28 (near support)
• 200-day MA: $2,273.62 (well below)

Technical indicators suggest MELI is in a short-term bearish trend but may find support near $1,946. The stock’s 5.4% drop has created a 26% gap to its 52-week low, but the RSI’s 51.30 reading hints at oversold conditions. For options traders, the MELI20251219C1975 call option stands out: it offers a 393,574% leverage ratio (extreme bullish exposure) with a delta of 0.0076 (low sensitivity to price changes). Under a 5% downside scenario (targeting $1,880), the payoff would be max(0, $1,880 - $1,975) = $0. This contract’s high implied volatility ratio (0.61%) and theta (-0.0645) suggest time decay is accelerating, making it a high-risk, high-reward play. Aggressive bears may consider shorting MELI20251219C1975 if the stock breaks below $1,946, but liquidity risks persist due to zero turnover. For ETFs, no leveraged product is available, but the broader XRT (Retail Select Sector SPDR) could offer sector exposure.

Backtest Mercadolibre Stock Performance
The backtest of MELI's performance after a -5% intraday plunge from 2022 to the present shows favorable results. The 3-Day win rate is 52.32%, the 10-Day win rate is 54.78%, and the 30-Day win rate is 58.47%, indicating a higher probability of positive returns in the short term. The maximum return during the backtest was 6.67% over 59 days, suggesting that MELI has the potential for recovery and even surpassing its previous levels after a significant drop.

MELI at Crossroads: Watch for $1967 Support or Regulatory Clarity
Mercadolibre’s 5.4% drop has created a critical inflection point. The stock’s technical setup—oversold RSI, bearish MACD, and proximity to the 52-week low—suggests a potential rebound, but regulatory risks in Brazil and Mexico remain unaddressed. Investors should monitor the $1,946 support level and Amazon’s performance (AMZN up 1.24%) as sector barometers. For options traders, the MELI20251219C1975 call offers extreme leverage but requires a high-risk tolerance. In the near term, a break below $1,967 could trigger a test of the 52-week low, while a rebound above the 50-day MA ($2,132.94) might signal a short-covering rally. Watch for regulatory updates or earnings clarity—either could be the catalyst for a reversal.