Date: 2026-02-22 Quarter: Q3 FY25 (ended Sep 30, 2025) Market cap: $101.2B | P/S (run-rate): 3.4x | Revenue YoY: +39.5% Q4 FY25 earnings: Feb 24, 2026 (2 days out) Note: No prior Bear writings on MELI. First look.
I haven't written about MELI specifically, but I've been aware of the story for years. Applying my framework from scratch.
What I expected going in:
What the data shows:
Verdict: My expectations were broadly confirmed. The growth durability surprised to the upside — a reacceleration in Q3 when consensus expected continued deceleration. The margin compression is real but the leading indicators validate management's investment thesis.
| | Q1 FY24 | Q2 FY24 | Q3 FY24 | Q4 FY24 | Q1 FY25 | Q2 FY25 | Q3 FY25 | | | Mar-24 | Jun-24 | Sep-24 | Dec-24 | Mar-25 | Jun-25 | Sep-25 | |---|---|---|---|---|---|---|---| | Revenue ($m) | 4,333 | 5,073 | 5,312 | 6,059 | 5,935 | 6,790 | 7,409 | | YoY % | 34.5 | 42.9 | 35.3 | 37.4 | 37.0 | 33.8 | 39.5 | | QoQ % | -1.7 | 17.1 | 4.7 | 14.1 | -2.0 | 14.4 | 9.1 | | Gross Margin % [GAAP] | ~46.7 | ~46.6 | 45.9 | 45.4 | ~46.0 | ~46.2 | 43.3 | | Op Margin % [GAAP] | ~13.3 | ~13.3 | 10.5 | 13.5 | 12.9 | 12.2 | 9.8 | | Net Margin % [GAAP] | ~9.3 | ~9.3 | 7.5 | 10.5 | 8.3 | 7.7 | 5.7 | | EPS Diluted [GAAP] | ~7.95 | ~9.31 | 7.83 | 12.60 | 9.74 | 10.31 | 8.32 |
The numbers I focus on for MELI aren't the same as SaaS metrics — this is a commerce/fintech platform. The equivalents are GMV growth, items sold, unique buyers, TPV, and credit quality.
| Metric | Q3 FY24 | Q4 FY24 | Q1 FY25 | Q2 FY25 | Q3 FY25 | Trend |
|---|---|---|---|---|---|---|
| GMV ($B) | 12.9 | 14.5 | 13.3 | 15.3 | 16.5 | Accelerating |
| GMV YoY % (USD) | n/a | 8% | 17% | 21% | 28% | Strong uptrend |
| Items Sold (M) | 456 | 525 | 492 | 550 | 635 | +39% YoY |
| Unique Buyers (M) | 61 | 67 | 67 | 70.8 | 77 | +26% YoY |
| TPV ($B) | 50.7 | 59.0 | 58.3 | 64.6 | 71.2 | +41% YoY (USD) |
| Fintech MAU (M) | 56 | 61 | 64 | 68 | 72 | +29% YoY |
| Credit Portfolio ($B) | -- | 6.6 | 7.8 | 9.3 | 11.0 | +67% from Q4 FY24 |
| NPL 15-90 % | -- | -- | 8.2% | -- | 6.8% | Improving |
| AUM ($B) | -- | 10.6 | 11.2 | 13.8 | 15.1 | +43% from Q4 FY24 |
Every leading indicator is pointing in the right direction. GMV (USD) accelerating from 8% to 28% over four quarters is the key signal — the FX drag is easing and underlying commerce momentum is strong. Items sold growing at 39% YoY while GMV grows at 28% means lower average ticket — category expansion into everyday consumables. That's what Amazon's flywheel looked like in its growth phase.
The credit portfolio is the variable that could break the story. $11B growing at $4.4B in nine months is aggressive. NPL 15-90 at 6.8% improving from 8.2% is encouraging, but these are early-stage metrics on a rapidly scaling book. The allowance ratio of 25.7% provides meaningful buffer, but I can't size credit risk with confidence from public disclosures.
MELI is not a SaaS company. It fails the 60% gross margin screen. That's not a reason to dismiss it — it's a reason to apply a different framework.
The better analog is Amazon circa 2015-2018: dominant marketplace + payments + logistics + credit + advertising, all compounding on each other. At 40% revenue growth on a $30B run-rate, MELI is doing something Amazon took twice as long to achieve on a fraction of the TAM runway.
The geography matters. LatAm e-commerce penetration at 15-20% vs 30%+ in developed markets. LatAm banking penetration even lower — hundreds of millions of people without access to credit. MELI is building the financial infrastructure for a continent. That's a multi-decade story, not a three-year trade.
What I can't fully price: credit risk. The fintech book is the engine and the tail risk simultaneously. If LatAm enters a severe recession or Argentina has another currency crisis, NPLs could go from 6.8% to 15%+ quickly. The allowance is there, but the book is scaling faster than management's ability to demonstrate credit quality across a full cycle.
The numbers have to match the theory. Let me check them.
| Metric | Value | My Assessment |
|---|---|---|
| Stock price | $1,996.87 | |
| Market cap | $101.2B | |
| P/S (run-rate) | 3.4x | Cheap for 40% growth |
| P/S (FY24 trailing) | 4.9x | Reasonable |
| P/E (FY24) | 53x | High, but suppressed by investment |
| Normalized P/E (12% op margin) | ~37x | Reasonable for 40% grower |
| P/Adj FCF (FY24 est) | ~78x | Real cash generation modest |
| Analyst consensus price target | $2,848 | 42% upside |
The P/S of 3.4x on run-rate revenue is where I start. For a dominant platform growing 40% with long secular runway, that's genuinely cheap. High-quality US SaaS companies growing 20-30% trade at 10-20x P/S. The LatAm country risk discount is justified, but 3.4x feels like the market is more worried than warranted.
The P/E of 53x looks expensive until you notice that op margins have compressed from 13.5% to 9.8% on purpose. Normalizing to 12% op margin on Q3 FY25 revenue run-rate (29.6B)gives 3.5B operating income. After tax, that's roughly 2.6Bnetincome, or 51 EPS — normalized P/E of ~39x. For a business growing 40%, that's reasonable. Shows what you can get when you apply the right lens.
The adjusted FCF number ($718M for 9M FY25) is the one that gives me pause. The credit book consumes operating cash flow. True economic cash generation, net of credit book funding, is modest relative to the $101B market cap. This is the key tension: the credit book is the growth engine but it also consumes the cash. You have to believe the credit quality holds and the book matures into a self-funding flywheel.
Thesis status: Compelling but requires credit conviction I don't yet have.
The growth durability is genuine. 27 consecutive quarters above 30% YoY on a base that keeps scaling — that's not luck, that's structural market leadership. The leading indicators (GMV, items sold, buyers, TPV, Fintech MAU) are all accelerating or stable and all growing strongly.
The thesis breaks if:
None of these look imminent. Amazon has been "attacking" Brazil for years and hasn't dented MELI's growth. Shopee is present but MELI's logistics moat (41% fulfillment capacity increase YoY) is a genuine barrier. The credit quality data is encouraging.
Key uncertainty for Q4 FY25 (Feb 24): Does the Brazil items sold acceleration continue? Does op margin stabilize or compress further? Does credit portfolio growth slow, indicating management is tightening underwriting standards, or does it continue at 67%+ pace?
Consensus: $8.52B revenue / $11.77 EPS. MELI has beaten revenue consensus for at least 4 consecutive quarters. Q4 is seasonally their strongest (holiday). I'd expect another beat.
No position. I haven't owned MELI and I'm not sure it fits my portfolio profile — it's large, complex, and the credit risk is difficult to underwrite from the outside.
That said: if I were sizing this up for initiation, the valuation at 3.4x run-rate P/S for 40% durable growth is interesting. My hesitation isn't the price — it's that I don't have conviction on the credit cycle yet. The allowance ratio looks adequate at 25.7%, and NPL trends are improving, but the book is growing so fast that I can't triangulate steady-state economics.
Watch for Q4 FY25 (Feb 24):
If those hold → initiation worth considering at current price levels.
Bear