Mercado Livre (MELI34): Shares Drop 10% as Earnings Report Reveals Margin Pressure; Analysts See Buying Opportunity
- Why Did MELI34 Shares Crash 10%?
- Short-Term Pain for Long-Term Gain?
- Key Metrics That Matter
- The Analyst Consensus: Buy the Dip
- Risks You Can’t Ignore
- FAQ: Your Burning Questions Answered
Mercado Livre's BDRs (MELI34) plunged 10% after its Q4 2025 earnings report showed solid revenue growth but shrinking margins due to heavy investments in logistics and credit. Analysts from Itaú BBA, Bradesco BBI, and XP Investimentos argue the dip is a buying opportunity, citing the company’s long-term strategy to dominate Latin American e-commerce. Despite short-term pain, metrics like GMV growth (35% YoY in Brazil) and record-low delinquency rates signal strength. Here’s why the market overreacted—and what to watch next.
Why Did MELI34 Shares Crash 10%?
On Wednesday, February 25, 2026, Mercado Livre’s BDRs (MELI34) nosedived 10.39% to R$74.38 on the B3 exchange, mirroring a 9.81% drop for its Nasdaq-listed shares (MELI). The sell-off followed a mixed Q4 2025 earnings report: while revenue beat estimates (up 32% YoY in Brazil), net profit fell 12.5% to $559M, missing the $587M consensus. The culprit? Aggressive spending on logistics, free shipping, and credit expansion squeezed Ebit margins to 10.1% vs. 13.5% in 2024. "This isn’t a surprise—MELI is playing the long game," noted the BTCC team, referencing TradingView data.
Short-Term Pain for Long-Term Gain?
Analysts unanimously defend Mercado Livre’s strategy. Itaú BBA highlighted Brazil’s GMV growth (35% YoY in Q4), nearly double the industry’s 20%, calling it "a textbook market-share grab." Bradesco BBI added that margin pressure stems from "smart bets" like MELI+ subscriptions and credit provisioning, which saw delinquencies hit record lows. XP Investimentos kept its "Buy" rating, noting 66% of the Ebit miss came from credit expansion—a "healthy negative." As one trader quipped, "Wall Street hates uncertainty, but MELI’s playing 4D chess."
Key Metrics That Matter
| Metric | Q4 2025 | Vs. Expectations |
|---|---|---|
| Revenue | $4.2B | Beat (+5%) |
| Net Profit | $559M | Miss (-4.8%) |
| Ebit Margin | 10.1% | Below (11.3% est.) |
| Brazil GMV Growth | 35% YoY | Crushed (20% market avg.) |
The Analyst Consensus: Buy the Dip
Three themes emerged from research notes:
- Margin Recovery Ahead: BBA expects commission hikes (like Shopee’s 2026 move) to ease investment cycles.
- Brazil’s Dominance: MELI’s logistics moat—11% lower shipping costs YoY—is squeezing rivals.
- Credit as a Catalyst: Despite higher provisions, loan defaults are at all-time lows.
Risks You Can’t Ignore
Not all is rosy. Argentina’s hyperinflation dragged results, and Mexico’s new e-commerce tax looms. Plus, with MELI trading at 12x sales (vs. Sea Limited’s 8x), some call it overvalued. "But remember," counters a BTCC analyst, "this is the only profitable major e-comm player in LATAM. You pay for quality."
FAQ: Your Burning Questions Answered
Why did MELI34 drop 10%?
Due to Q4 2025 earnings missing profit estimates ($559M vs. $587M expected) as heavy investments in logistics/credit squeezed margins.
Is MELI34 a buy after the crash?
Analysts say yes—BBA, BBI, and XP all recommend buying, citing long-term market-share gains and Brazil’s 35% GMV growth.
What’s MELI’s biggest risk?
Short-term margin volatility and Argentina’s economic crisis, though Brazil/Mexico now drive 80% of revenue.
