What Happened?
Shares of latin American e-commerce and fintech company MercadoLibre (NASDAQ: MELI) fell 7% in the afternoon session after investors locked in some profits amid broader macroeconomic concerns following a significant run since the start of the year.
Given the absence of any company-specific update, this move was likely amplified by a general "risk-off" sentiment in the market, fueled by the uncertainty of a potential U.S. government shutdown. Furthermore, a report showing an unexpected drop in U.S. consumer confidence added to the bearish mood for stocks.
The shares closed the day at $2,337, down 6.5% from previous close.
The stock market overreacts to news, and big price drops can present good opportunities to buy high-quality stocks. Is now the time to buy MercadoLibre? Access our full analysis report here, it’s free.
What Is The Market Telling Us
MercadoLibre’s shares are not very volatile and have only had 9 moves greater than 5% over the last year. In that context, today’s move indicates the market considers this news meaningful, although it might not be something that would fundamentally change its perception of the business.
The biggest move we wrote about over the last year was 11 months ago when the stock dropped 16.3% on the news that the company reported weaker third-quarter earnings.
The main reason was that it missed on operating income margin because it ramped up investments in its credit and logistics businesses. Ramping up loan originations leads to the recognition of the allowance for doubtful accounts upfront (the expected losses on the loans). However, the new loan originations came from credit cards and moving up-market to higher-quality customers. Because these new accounts have lower default risk, the yields are lower and result in a lower blended NIMAL spread (aka margins).
However, the new loans are additive to overall profit dollars, lower the risk of the broader credit portfolio, and increase MELI's market share and stickiness/wallet share with customers.
On the other hand, MercadoLibre delivered impressive revenue growth this quarter. Overall, the stock is reacting to the bottom line miss.
MercadoLibre is up 32.7% since the beginning of the year, but at $2,343 per share, it is still trading 10.4% below its 52-week high of $2,614 from June 2025. Investors who bought $1,000 worth of MercadoLibre’s shares 5 years ago would now be looking at an investment worth $2,164.
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