MercadoLibre Balances Strong Growth and Profitability Despite Macro Headwinds; Shares Fairly Priced

Wide-moat MercadoLibre posted a strong fourth quarter, achieving its first full year with $10 billion in net revenue, $1 billion in EBIT, and $100 billion in processed payments. It has deftly navigated investments in myriad concurrent initiatives, including a growing financial services ecosystem, an ad platform that has swelled to 1.4% of gross platform sales (five times larger than prepandemic), and a $2.8-billion lending business with enviable economics. Most importantly, the firm has done so profitably, with 11.6% quarterly operating margin representing the highest quarterly print since the firm pivoted from a consumer-to-consumer to a principally business-to-consumer model in 2017-18. We expect to raise our $1,140 fair value estimate by a low-single-digit percentage, with the quarter unearthing nothing that shakes our long-term expectations.