Is MercadoLibre Stock Ready to EXPLODE?! | MELI Q126 Update

Added: 2026-06-01

[00:00:00]If you own Marcato Libre or you have been thinking about buying it, watch this video closely. This company just had its biggest quarter in its entire history, but the stock got punished anyway. Revenue hit $8.8 billion. It grew 49% in a single year. Record revenue and profit went down. Net income fell to $417 million. A year ago, it was $494 million. Something happened inside this company that made up the difference. And there are two numbers buried inside this filing that explain the entire thing. My name is Ken Freeman. I'm a finance professor, CFA Charter Holder, and I have worked over 20 years on Wall Street. I train the top analysts at JP Morgan and Morgan Stanley who get paid six figures to do one thing, read SEC filings the way most people read a text message. Meanwhile, the finance YouTubers in your feed, they're reading the same earnings recap you are and adding a thumbnail. And you have been making investment decisions based on that. I went inside Marcato Libre's 10Q filing and found what those guys and Wall Street are missing. I call it the bad loan bill. If that bill keeps growing, the stock breaks. If it cools off, the stock rips. So, is Marcato Libre the buy of the decade or are the bears about to be right? Marcato Libre brought in $ 8.8 billion. That is every dollar the company earned from selling products and from its bank. It grew 49% in one year. For a company this size, that is insane. When revenue jumps that hard, profit supposed to jump, too.

[00:01:37]Income from operations fell. It came in at $611 million. A year ago, it was $763 million. That is the profit from running the business. The operating margin tells another story. Out of every dollar of revenue, 6.9 cents was profit this quarter. A year ago, it was 12.9 cents.

[00:01:57]That number almost got cut in half. So, where did all that money go? To understand this answer, you have to see how the company makes money. Imagine you live in Sa Paulo, Brazil. You open one app, Marcado Libé. You buy headphones and pay in the app. Their own delivery network drops the box at your door in a day. Then, your paycheck lands in the same app. You pay bills with it. You get a credit card, one app for shopping and money. Now, picture 84 million people doing that exact same thing. Marcato Libre makes money two main ways. First, commerce, the online shopping side. That brought in almost $4.9 billion. It grew 47.4% in a year. Second, fintech, the bank and payment side. That brought in almost $4 billion. It grew 51.1% in a year. The bank side is now almost as big as the shopping side. Here is the secret weapon. They see every purchase, loan, and paycheck for 84 million buyers. They can spot who repays a loan before a normal bank ever could. But this quarter, the same lending engine is exactly where the trouble started. So, what happens when your biggest advantage becomes your biggest risk? When something is wrong with the business, the warnings show up in the data. I found four red flags and they escalate.

[00:03:18]Start with the simplest number of all, profit per share. That is your slice of profit for every share that you own.

[00:03:25]This quarter it was $823.

[00:03:27]A year ago it was $9.74.

[00:03:31]Record revenue and your slice shrank. If you own this stock, you earn less per share than you did last year. And it gets worse. Here are three numbers.

[00:03:41]Watch them connect. One, revenue grew 49% in a year. Two, the cost of those revenues grew 57.5% in the same year. The bills grew faster than the sales. Three, the gross profit margin. That is what is left on each sale after the direct cost of making it.

[00:04:01]It fell to 43.7 on the dollar. A year ago, it was 46.7.

[00:04:07]Connect them. They sold more but kept less on every single sale. If you're finding this research valuable, hit the like button and subscribe. It helps us bring Wall Street level analysis like this to you every week for free. This is the one that matters most. Marcato Libre lends money, cards, and cash loans. When a company lends, it has to guess how much will not come back. It sets that cash aside in advance. The filing calls it the provision for doubtful accounts.

[00:04:34]In plain English, the cost of bad loans.

[00:04:37]A year ago, that cost was $63 million.

[00:04:41]This quarter, it was $1.24 billion. It more than doubled. That one line is the biggest reason the profit fell.

[00:04:49]Operating margin went from 12.9 down to 6.9 on every dollar. And the next flag makes this one look small. This is the red flag the bulls cannot explain.

[00:05:00]Marcato Libre runs in different countries. The filing adds up the profit from each one. They call it total direct contribution. This is what each region earned after paying its own direct costs. One, company revenue grew 49%.

[00:05:16]Two, the regional profit did not grow.

[00:05:19]It fell from $1.45 billion down to $1.4 billion. Three, as a share of revenue, it dropped from 24.5 to 15.9 on the dollar. Far more sales, less actual regional profit. That is not one bad line. That is the whole engine. Four red flags. That is the entire bare case. But here's what the bears cannot explain.

[00:05:44]Marcato Libre has 84 million people actively buying on its platform. A year ago, that was 67 million. No rival in Latin America is anywhere close to that scale. So with an engine running like that, what is the upside for bulls?

[00:05:59]Buried on page 50 of this filing is a number that Wall Street barely mentioned. Gross merchandise volume, the total value of everything sold across the platform. It grew 42% in a year. It reached almost $19 billion and items sold went from 492 million to 722 million in a single year. The company is growing so fast the profit cannot keep up yet. Mexico revenue grew 61.7% in a year. It hit almost $2 billion.

[00:06:34]Brazil, the biggest market, grew 54.9%.

[00:06:38]It brought in almost $4.8 billion. These are huge markets growing like early stage startups. For a company this size, that pace is rare. Three numbers on the fintech side. One, fintech revenue grew 51.1% in a year. It reached almost $4 billion. Two, the people using it every month went from 64 million to 83 million. Three, the money flowing through its system grew 50% in a year.

[00:07:08]Connect them. A real bank is forming inside the company. Here is the last buried number. It sits on page five of the filing. The cash from running the business was $2.1 billion this quarter.

[00:07:22]A year ago, it was $1 billion. The cash more than doubled while the paper profit was falling. A company in real trouble does not double its cash. Four red flags, four green flags. So when Wall Street looks at this, where do they actually land? 25 analysts cover Marcato Libre. The consensus rating is still a buy. The median price target is 2250.

[00:07:43]Let's break down three major firms.

[00:07:46]Croup did something the others did not.

[00:07:48]It cut the stock from buy down to neutral. That is Wall Street language for step to the sidelines. It also cut its price target from $2,200 down to $1,950. A downgrade and a lower number on the stock. The path to profit became too uncertain. Margins compressed and they could not see when it stops.

[00:08:08]Goldman Sachs kept its buy rating, but it cut the target from 24.440 down to 2100. Still worth buying, just worth less than they thought. They admitted they underestimated the spending, but the growth numbers were too strong to walk away from. Morgan Stanley is still the most bullish of the three. It kept its overweight rating. That means we should own more mellie than the market, but Morgan Stanley also cut its target from $2,600 down to $2450. They know that 2026 earnings are going to be weaker than expected, but they still believe the spending is building something real. Now connect all three firms. Every single one cut its price target. The bulls stayed bulls but they all lowered the number and one of them downgraded the stock. They did not see this much spending coming. Wall Street has a number for this stock. My own model has a different one. The gap between them is the trade. So what does the institutional grade data say? The smart money on Wall Street. Let's cover that next. Cap IQ is a $25,000 per year subscription that I am showing you guys today for free. If you want to invest like the pros, you need to see what the pros see. The analysts that I train at the top banks across Wall Street all use Cap IQ. Here's the Marcato Libre valuation dashboard. Wall Street has a low value for Marcato Libre of 1750 and a high value of 2,800. The median is 2250 which is over 36% upside to today.

[00:09:36]The overall rating is 1.56, which is an outperform rating. For that median to be achievable, three things must be true.

[00:09:43]The cost of bad loans has to stop growing faster than revenue. The operating margin has to climb back up from 6.9 on the dollar. Mexico and Brazil have to keep growing near this pace. Cap IQ does not give certainty, but it shows us what the biggest investors are betting on. The street has a median target of 2250, but every firm just cut its number and the company itself will not give us a forecast at all. So which side of the trade is actually reading the numbers right? At the start of this video, I told you about the bad loan bill. Marcato Libre had record revenue but profit went down.

[00:10:19]Was that a company in trouble or a company spending to win? Two numbers answer that question. Now I will show you the answer. Number one, the bottom line profit. The filing calls it net income. In plain English, what the company kept after every single bill was paid. This quarter, it was $417 million.

[00:10:39]A year ago, it was $494 million. Number two, the cash from operations. The real cash that came in the door. This quarter it was $2.1 billion. A year ago, it was $1 billion. Paper profit went down. Real cash went up a lot. Here's the verdict in one word. Watch. Now, here's what nobody is telling you. The profit did not fall because of taxes. The tax rate actually went down. It dropped from 30% a year ago to 27.9% this quarter. They paid a smaller share to the government and profit still fell. This was the business investing its own profit. Now, look at the safety net. Marcato Libre is sitting on almost $3.7 billion of its own cash as a buffer. And even with profit falling, its stacked up earnings still grew from 5.8 billion to $6.2 billion. This company is not fragile. So why did profit fall while cash rose?

[00:11:38]Because the cost of bad loans, that $1.24 billion line, is charged against profit right away. But many of those loans will still be paid back later.

[00:11:49]Marcato Libre is taking the hit now for loans it made to grow fast. If you want access to the full DCF model that I'm about to show you, that is inside the Windl Like Wall Street School community.

[00:11:59]The link is in the description.

[00:12:01]>> You should seek the advice of investment professional always. I do not know your individual financial situation. This content is meant to educate and is not investment advice.

[00:12:06]>> That being said, my DCF model shows an implied share price of 2874. With a stock currently sitting at 1648, that implies upside of over 74%. So based on the numbers, Melly has a buy rating on Wall Street. The stock trading at greater than a 20% discount is considered a buy rating because it provides us a margin of safety. I do not currently have a position in Marcato Libre, but it is on my watch list for 2Q. Pay attention to one thing with Marcato Libre. Does the cost of bad loans start growing slower than revenue?

[00:12:38]Marcato Libre reports again on August 5th. If yes, the bad loan bill is clearing. If no, the bare case is real.

[00:12:47]That is the only question that matters.

[00:12:49]Next week, I'm going back inside the filings of a company where the headline number and the real number tell different stories. You will not want to miss it. Is Marcato Libre spending to win or spending itself into a hole? Let me know in the comments below. As always, be relentless.