Looking for the “next” Amazon (NASDAQ:AMZN) stock? Look no further, as MercadoLibre (NASDAQ:MELI) could be considered the “Amazon of Latin America.” MercadoLibre stock isn’t cheap, by any means, but it has all the markings of a long-term wealth builder.
Like Amazon, MercadoLibre operates a widely used e-commerce platform. However, MercadoLibre also runs a fintech-services platform called MercadoPago.
Latin America has a population of over 650 million people. An emerging middle class and increasing Internet penetration make Latin America fertile ground for e-commerce opportunities. So, even if you missed out on the multi-year rally in Amazon stock, you can seize a moneymaking moment with MercadoLibre stock.
Sales Growth Justifies MercadoLibre Stock Rally
I’m not going to claim that MercadoLibre stock is cheap. The share price recently hit $1,500. Furthermore, MercadoLibre’s GAAP trailing 12-month price-to-earnings ratio is elevated, at 77.14x.
Value-focused investors might bristle at MercadoLibre’s high multiple. On the other hand, sometimes a company’s sales growth can justify its lofty P/E ratio. After all, Amazon has been richly valued for a long time, yet the stock has made a lot of money for some people.
Impressively, MercadoLibre managed to increase its fourth-quarter 2023 net revenue by 42% year over year to $4.26 billion, thereby beating Wall Street’s call for $4.12 billion. Notably, Mercado Pago, MercadoLibre’s fintech division, posted 34% net-revenue growth.
So, don’t be surprised if MercadoLibre’s investors continue to grow their wealth despite the high share price. JPMorgan analysts raised their MercadoLibre stock price target from $2,000 to $2,150, and that’s not unrealistic at all, given the company’s sales acceleration.
MercadoLibre: Spending Money to Make Money
When a company’s revenue grows rapidly, this enables strategic investment opportunities. In MercadoLibre’s case, the company is pouring large amounts of investable capital into Latin America.
The numbers, I’ll admit, are jaw-dropping. This year, MercadoLibre plans to invest $380 million in Colombia, $2.45 billion in Mexico and $4.6 billion in Brazil.
Why would MercadoLibre move so much capital into Brazil? According to Reuters, MercadoLibre “generates more than half of its revenue in Brazil.” Hence, this particular investment makes sense, though $4.6 billion is still a lot of money.
The company intends to allocate capital toward technology, advertising, product launches and other endeavors. Without a doubt, MercadoLibre’s investment in Latin America will impact the company’s bottom-line results for a while.
Yet, not unlike Amazon, MercadoLibre is making the necessary preparations to develop into a multi-generational e-commerce powerhouse.
MELI Stock: Unlock a Prime Opportunity in Latin America
MercadoLibre’s quarterly sales growth is undeniable, and the shares can still be worth owning even if they’re not cheap. MercadoLibre’s strategic capital allocations could solidify and expand the company’s e-commerce market dominance in Latin America.
Thus, investors have a chance to capture the “next” Amazon as MercadoLibre stakes its claim in an important emerging market. In the coming quarters, MELI stock should easily break above $2,000 and then $2,150.
Then, the discussion will turn to stock-split possibilities and the next frontiers for MercadoLibre.
On the date of publication, David Moadel did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
