MercadoLibre: A Calculated Risk

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MercadoLibre (MELI +3.58%) moved today. A three percent bump, courtesy of a report suggesting they still own the streets in Chile’s online bazaar. It wasn’t a landslide, but in this business, even a nudge can tell you something.

ResearchAndMarkets.com, a name that sounds like a late-night infomercial, confirmed what a decent scout on the ground could have told you: MercadoLibre isn’t giving up its lead in Chile anytime soon. The numbers, of course, had a part in it.

The Lay of the Land

Chile’s B2C e-commerce market is currently clocking in around $12.6 billion. Forecasts predict a 7.6% climb through 2026, bringing it to $16.9 billion. Not exactly a gold rush, but a steady drip that’s hard to ignore. Two-thirds of Chileans are already shopping online, and the numbers keep rising. The pandemic gave it a push, sure, but it’s stuck now, fueled by decent internet access and a population that’s figured out how to use it.

MercadoLibre and Falabella, a local Chilean player, are the two heavyweights. Falabella is expanding, both at home and abroad, and they’re hungry. But MercadoLibre, despite being the outsider, still holds the upper hand. Being foreign doesn’t always hurt, apparently.

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Worth the Gamble?

At $104 billion, MercadoLibre isn’t cheap. Fifty times trailing earnings feels like a stretch, like asking a man to run a marathon in dress shoes. But look closer. Barely twelve times free cash flow. That’s a different story. A bargain price for a stock projected to grow 33% long-term. It’s not a sure thing, but it smells like opportunity.

Falabella, at $18 billion, is a fifth the size. Cheaper on paper—17 times earnings, 15 times free cash flow. But on a price-to-free-cash-flow basis, they’re not that different from MercadoLibre. A slightly smaller gamble, perhaps, but a gamble nonetheless.

Finding a way to invest in Falabella directly is a bit of a headache—they don’t seem eager to list in the U.S., even over-the-counter. So, for those of us playing the game from this side of the border, MercadoLibre looks like the easiest way to get a piece of the Latin American e-commerce boom. It’s not a guarantee, but in this business, you take what you can get. And sometimes, the best bet is the one that’s staring you right in the face.

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2026-01-22 22:12