MercadoLibre Is Down 16% This Year While Growing Revenue 49%. Is This the Best Dip to Buy?

MercadoLibre shares are down 16% in 2026 (and 35% over the past year) as the company faces margin pressure from Brazil’s cutthroat e-commerce competition and a surge in credit risk. After a disappointing Q1, shares fell 17% in six trading days; while revenue rose 49% YoY, profit targets were missed in 3 of the last 4 quarters and the credit portfolio jumped 87%, driving higher debt loss provisions. Wall Street trimmed profit projections by 28% for 2026 and 25% for 2027, even as Mercado Pago transactions increased 50% to $87.2B and active buyers rose 26% to 84.1M.

Analysis

Brazil e-commerce looks like a subsidy war, not a demand collapse. That matters because the cost of defending share is being pushed onto margins now, while the payoff from scale comes later; weaker local players without logistics + payments integration are the first to break, and that can leave MELI with a larger moat once promo intensity normalizes. The second-order winner may actually be the merchant ecosystem tied to MELI fulfillment, ads, and payments, while small independent sellers and undercapitalized regional competitors face lower take rates and worse traffic quality.

The bigger issue is credit. Rapid loan-book growth usually front-loads provision expense and turns reported EPS into a lagging indicator for 1-3 quarters, so the next leg of estimate cuts likely depends less on revenue and more on delinquency/vintage data. If losses continue to creep up, investors may stop paying a platform multiple and start valuing MELI like a levered consumer lender, which would cap any multiple rebound even if GMV stays strong.

Contrarian view: the selloff may be too focused on near-term accounting drag and not enough on operating cash generation and cross-sell density. If provisions stabilize and Brazil margins stop bleeding, the stock can rerate well before EPS fully recovers, but the reverse is also true: another earnings miss or credit surprise would extend the derating for months. The key falsifier is a fresh round of 2026/2027 estimate cuts tied to worsening charge-offs or evidence that promo spend is still accelerating.

Key Decisions for Investors

• Neutral-to-slightly bearish MELI over the next 4-8 weeks: do not chase the dip until the next earnings print shows loan-loss provisions flattening sequentially; otherwise the stock can keep drifting as estimates reset lower.
• If forced to express the thesis, prefer a 3-6 month MELI call spread over outright stock only after credit metrics stabilize; upside comes from a rerating, while downside is already being driven by margin fear.
• Watch for a tactical long in MELI on any 10-15% post-earnings drawdown only if Brazil commerce margin and provision expense both inflect better than consensus; that would signal the promo war is peaking rather than intensifying.
• Avoid shorting MELI solely on the current pullback: if competitor subsidies fade first, MELI can regain pricing discipline quickly, creating a sharp squeeze in 1-3 months.
• Falsifier/exit trigger: any additional double-digit cut to 2026/2027 EPS estimates or a visible uptick in charge-offs; that would imply the loan book is the dominant story and the recovery thesis is premature.