As anyone who follows the market closely knows, tech stocks have sold off in recent weeks. While the industry delivered on technical breakthroughs and massive revenue growth for investors, rising interest rates, along with concerns about the staggering cost of artificial intelligence (AI) build-outs, weighed on those stocks.
Fortunately, investors have more options than tech and the “Magnificent Seven.” In my view, the sell-off is an excellent opportunity to consider other investments. Right now, I hold and periodically add to my position in MercadoLibre (NASDAQ: MELI), and here’s why.
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Why MercadoLibre?
Indeed, one might question the choice of MercadoLibre on the surface since it is tech-adjacent. Its e-commerce and fintech platforms depend on technology, and the company has applied AI in many of its applications. Also, in one sense, it can represent a second chance for investors who missed out on Amazon, as MercadoLibre leads the e-commerce market in Latin America.
However, MercadoLibre differs from Amazon in that it is not a cloud service provider. Thus, it has not had the massive capital expenditures (capex) that have weighed on Amazon. In the first half of 2026, MercadoLibre’s capex was $712 million, a tiny fraction of the $98 billion Amazon allocated over the same period.
Furthermore, while MercadoLibre has not followed Amazon into the cloud, the consumer discretionary stock has clearly evolved into a conglomerate. Addressing the economic and political challenges in Latin America appears to have inspired that move.
When Latin America was more of a cash-based society and millions could not buy online, Mercado Pago was founded to offer digital financial products to these customers. Mercado Pago went on to serve customers not buying on MercadoLibre’s e-commerce site and became the top fintech company in Latin America.
MercadoLibre employed the same strategy to improve logistics. Consequently, that enterprise, Mercado Envios, brought same-day and next-day delivery to the region.
Addressing company struggles
Nonetheless, even for those who can buy into its strategy of turning adversity into opportunity, choosing MercadoLibre may sound counterintuitive. Investors have sold the stock off over the last year. The company cut margins to stave off e-commerce competition and dramatically increased the allowance for doubtful accounts (i.e., bad loans) as it aggressively expands its loan book.
Still, the margin cuts and loan book expansion are likely to dramatically increase revenues and, by extension, profits over time. Also, its past successes should suggest that Brazil’s election results are unlikely to derail the company’s value proposition.
Additionally, the stock plunged following the surprise reelection of Luiz Inácio Lula Da Silva, as many shareholders perceived his opponent, Flavio Bolsonaro, would have pursued a monetary policy more favorable to MercadoLibre.
Indeed, Brazil is highly critical to the company, as it accounts for about 54% of the company’s revenue in the latest quarter. However, investors should recall that MercadoLibre built much of its success by turning Latin America’s economic and political challenges into business opportunities, increasing the likelihood it will do so again amid the election turmoil.
MercadoLibre’s financials
The company’s financials highlight both the opportunity and the adversity.
In the first half of 2026, revenue of $19 billion rose by 49% from year-ago levels. Despite that increase, net income actually fell by 13% over the same period to $883 million. The aforementioned margin cuts and bad-loan expenses weighed on its profits.
Third-quarter earnings also come out on Nov. 4. Analysts are looking for a 45% yearly revenue increase, and although that could imply a slight slowdown, the company is likely to continue growing rapidly.
Also, with the pullback, MercadoLibre trades at a price-to-earnings (P/E) ratio of 45. While that may sound high compared to the S&P 500‘s average earnings multiple of 26, investors should remember that the company’s investments in itself have reduced profits, suggesting the stock is not as overvalued as it appears.
Moreover, MercadoLibre’s market cap of $85 billion is a small fraction of Amazon’s at $2.7 trillion. That implies MercadoLibre may outperform the Magnificent Seven stocks, whose larger sizes usually make higher-percentage growth more difficult. That advantage suggests it might make sense to buy the dip in MercadoLibre.
Buy MercadoLibre stock
Ultimately, MercadoLibre seems to have Amazon-like growth potential and the smaller size that should help it outperform the Magnificent Seven stocks.
Latin America’s challenges, most recently highlighted by Brazil’s election, add to the stock’s risks. Also, MercadoLibre has had to reduce profits to solidify its e-commerce and fintech business.
Nonetheless, MercadoLibre has thrived by turning adversity into opportunity and should continue to do so. Furthermore, its moves to build market share should increase profits in the long term. Thanks to its smaller size, the stock appears to be gearing up for further growth that could easily reward investors with market-beating returns.
Should you buy stock in MercadoLibre right now?
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Will Healy has positions in MercadoLibre. The Motley Fool has positions in and recommends Amazon and MercadoLibre. The Motley Fool has a disclosure policy.
