1 Solid E-Commerce Stock That's Not Amazon to Keep On Your Radar – The Motley Fool

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This e-commerce leader is well-positioned to grow in the coming years.
One of the most remarkable companies in the last two decades is arguably Amazon, which rode the e-commerce tailwind to great success.
While the e-commerce tailwind is ongoing, investors will likely not make enormous gains with Amazon’s stock. After all, the company is already worth more than $2 trillion in market capitalization.
The good news is that there are other smaller but well-established e-commerce companies that investors can keep an eye on. MercadoLibre Inc (MELI -1.35%), the leading e-commerce company in Latin America, is one of those candidates.
Image source: Getty Images.
MercadoLibre is a rare tech company with a solid growth track record that spans almost two decades, yet it is still “small” enough to make a difference in your portfolio.
Founded in 1999, MercadoLibre caught the attention of the then-leading e-commerce platform eBay, which bought a 19.5% stake in the company. The Latin American company went public in 2007, and since then, revenue has grown from just $52 million in 2006 to $14.5 billion in 2023 — or more than 278 times. It’s the clear leader in this region, significantly ahead of even Amazon in market share.
So, what did the company do right? Well, many things. Topping the list is MercadoLibre’s localized approach to managing its business. It deeply understands Latin America and uses that knowledge to tailor its operations, services, and strategies. This localized approach means the company can recruit the right people to make the right decisions and execute quickly. Besides, the tech company’s deep understanding of its markets helps it build a solid brand that resonates well with customers.
The tech company has also been highly innovative, constantly iterating and offering new products and services to delight its customers. For instance, it leverages customer relationships and trust in the brand to launch adjacent services such as digital payments and fintech. These services strengthen its relationship with customers and help it build a vibrant and growing ecosystem in this region.
It is also worth mentioning that MercadoLibre has always had its founder, Marcos Galperin, leading the company over the decades. The benefit of a founder-led company is that it can focus on the long term, making bets and taking decisions that matter in the long run — such as to delight its customers and subsequently create value for shareholders.
In short, MercadoLibre has done many things correctly over the years, which explains its solid performance over this period.
One of the biggest concerns that growth investors have is whether a company making billions in revenue, like MercadoLibre, is still well-positioned to grow. While most large companies will inevitably face growth bottlenecks as they expand, this doesn’t seem to be the case for this e-commerce leader — at least, not in the near future.
To put it into perspective, the company grew revenue by a solid 37% in 2023 to $14.5 billion. Net income performed even better, doubling from $482 million to $987 million. That’s a remarkable performance, considering that the company was already generating more than $10 billion in revenue!
There are many drivers to that. First, Latin America’s e-commerce market penetration remains low compared to countries like China and the U.S., giving it plenty of room for growth. Besides, as countries in this region still grow in per capita gross domestic product (GDP), the growing disposable income will likely contribute further to consumption.
Internally, MercadoLibre is constantly working to delight its customers, which will naturally lead to higher spending over time — after all, online shopping is a habitual activity. Moreover, the tech company is constantly experimenting with new services, which will help grow customer wallet share further.
One major downside is that competition has intensified in recent years thanks to the entrance of new players like Shopee, Shein, and Temu. But given the vast opportunity ahead, there will be enough room for multiple players.
MercadoLibre is a rare company with a combination of a long growth track record, profitability, and prospects for growth in the coming years.
Still, there are risks involved. The company is an overseas business subjected to issues like foreign exchange and cultural differences. The stock is also not cheap — it has a price-to-earnings (P/E) ratio of 74 times.
However, for investors looking to benefit from the e-commerce tailwind, MercadoLibre should be on the radar.
John Mackey, former CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. Lawrence Nga has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Amazon and MercadoLibre. The Motley Fool recommends eBay and recommends the following options: short July 2024 $52.50 calls on eBay. The Motley Fool has a disclosure policy.
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