Investing in U.S. stocks brings near-term uncertainty. The ever-changing tariff levels mean that U.S. consumers and businesses are unsure of what many items and inputs will cost, making the business environment difficult to navigate.
Such conditions increase the appeal of international stocks not tied to the U.S., and this could play into the hands of MercadoLibre (NASDAQ: MELI). Since the company serves Latin America exclusively, investors shelter themselves from the effects of tariffs and benefit from the secular growth story that continues to drive growth in this internet and direct marketing retail stock.
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Why MercadoLibre stands out
MercadoLibre offers e-commerce, fintech, and logistics services within Latin America. That has always meant that what happens in the U.S. has no effect on the company's performance, and that would apply to U.S. tariffs.
That said, the company opened a distribution center in Texas to bring U.S. goods to Mexican consumers. Admittedly, that part of the business could slow if Mexico raises tariffs on U.S. goods. Nonetheless, MercadoLibre has thrived for most of its history without ties to the U.S., so this news is unlikely to derail MercadoLibre's growth story.
Instead, MercadoLibre has and will likely continue to thrive by addressing regional needs. The company began online selling in 1999 and has since established itself as the leading e-commerce company in the region. This gives it a competitive advantage over newer entries such as Amazon, which has tried to compete in markets such as Mexico and Brazil.
Moreover, MercadoLibre's most successful business may be its fintech arm, Mercado Pago. Mercado Pago has long thrived by helping its cash-based customers buy on MercadoLibre's site. So successful was this business that it opened this service to customers not buying on MercadoLibre. That move has also helped it thrive as more fintech companies emerge.
Additionally, it established Mercado Envios to help its e-commerce clients and address regional logistics challenges. Mercado Envios helps merchants fulfill and ship orders. Through this, it offers same-day or next-day delivery in many cases, a service that was not previously available in the region.
How these businesses boost MercadoLibre
These businesses helped MercadoLibre generate almost $21 billion in revenue in 2024, a 38% increase from year-ago levels. This occurred as gross merchandise volumes rose 15% during the year. However, the most notable growth came on the fintech side. In 2024, it reported $197 billion in total payment volume, up from $147 billion in the prior year.
Amid that growth, the cost of revenue rose 49%, surpassing its revenue growth rate. Still, expense growth was 29%, and the company reduced foreign currency losses and income taxes, allowing 2024 net income to grow to $1.9 billion, a 94% increase from 2023 levels.
Admittedly, this news may not appease investors who have looked at analyst forecasts. Consensus estimates point to a 24% increase in revenue for 2025, which may cause concern since investors often turn on stocks with slowing revenue growth.
Nonetheless, MercadoLibre stock is up by around 45% over the last year.
Moreover, its P/E ratio is 55. While that may sound high, that reflects Amazon's P/E ratio during its growth phase in the 2000s and 2010s. Also, MercadoLibre's market cap of $105 billion is a small fraction of Amazon's market cap of nearly $1.9 trillion. That smaller size makes it easier to grow revenue at a faster pace than a megacap such as Amazon, which could bode well for MercadoLibre and its shareholders.
MercadoLibre as a tariff shelter
Thanks to its minimal U.S. exposure, MercadoLibre stock can likely help investors avoid most of the effects of U.S. tariffs.
Admittedly, Mexico's ties to the U.S. could mean fewer sales of U.S.-made goods, and slowing revenue growth could sour investors on the stock in the near term.
However, MercadoLibre continues to thrive by addressing some of Latin America's needs. Also, the company's P/E ratio makes it significantly cheaper than Amazon during its growth phase, meaning the stock could thrive regardless of whether skepticism surrounding tariffs continues to hurt U.S. stocks.
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John Mackey, former CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool's board of directors. Will Healy has positions in MercadoLibre. The Motley Fool has positions in and recommends Amazon and MercadoLibre. The Motley Fool has a disclosure policy.
