Why Billionaire Stanley Druckenmiller Ditched Broadcom for MercadoLibre (MELI) Stock

TLDR

• Stanley Druckenmiller sold his entire Broadcom position in Q3 and purchased MercadoLibre stock, which has returned 6,910% since its 2007 IPO
• MercadoLibre controls 28% of Latin America’s online retail market and operates the region’s largest fintech payment platform
• The company’s Q3 revenue jumped 39% to $7.4 billion, marking 27 consecutive quarters of 30%+ revenue growth
• MercadoLibre serves over 100 million annual buyers and 60 million fintech users across 19 Latin American countries
• Analysts predict 42% upside with a median target price of $2,842 per share

Former hedge fund legend Stanley Druckenmiller made a surprising move in the third quarter. He ditched his entire stake in AI chip giant Broadcom and loaded up on MercadoLibre instead.

Druckenmiller isn’t just any investor. He averaged 30% annual returns over three decades without a single losing year. When he moves money around, people pay attention.

MercadoLibre doesn’t get the same buzz as tech giants. But the numbers tell a different story. The stock has climbed 6,910% since going public in 2007.

MercadoLibre, Inc., MELI

The company dominates Latin American e-commerce with a 28% market share. That figure is expected to hit 30% by 2026. But MercadoLibre is more than just an online marketplace.

The company built a full ecosystem of services. It handles advertising, payments, and logistics across the region. This approach creates a powerful network effect that keeps users locked in.

MercadoLibre processes more digital payments than anyone else in Latin America. It also runs what the company calls the “fastest and most extensive delivery network” in the region.

Strategic Investments Pay Off

The company reported Q3 revenue of $7.4 billion. That’s a 39% jump from the previous year. Commerce sales grew 33% while fintech revenue surged 49%.

This marked the 27th straight quarter of revenue growth exceeding 30%. Few companies maintain that pace for so long.

Operating margins dipped slightly and earnings growth slowed to just 6%. But there’s a reason for that. MercadoLibre is spending strategically.

The company lowered its free shipping threshold in Brazil. It also launched a credit card in Argentina. These moves cost money upfront but strengthen market position.

The strategy is already working. Unique buyers in Brazil jumped 29% in Q3. That’s the fastest growth rate in over four years. Brazilian customers also bought 42% more items.

Credit Card Launch Targets Huge Market

The Argentina credit card launch could be a game-changer. About 60% of Argentine adults don’t have a credit card. That’s a massive untapped market.

MercadoLibre operates across 19 countries but generates most revenue from Brazil, Argentina, and Mexico. The company serves 100 million annual buyers and 60 million fintech users.

That sounds like a lot. But Latin America and the Caribbean have 668 million people. The growth runway is enormous.

Revenue has grown at a 56% annual rate from 2018 to 2024. Net income grew even faster at 184% annually after turning consistently profitable in 2021.

Competitors have struggled. Americanas, the biggest rival in Brazil, got caught up in an accounting scandal. Sea Limited shut down most of its Shopee marketplaces in the region. Amazon hasn’t gained much traction.

What Happened With Broadcom

Druckenmiller sold Broadcom at an interesting time. The chip maker posted strong Q4 results with revenue up 28% to $18 billion. Earnings per share climbed 37%.

Broadcom dominates AI networking chips with over 80% market share. The company also supplies custom AI accelerators to Google, Meta, ByteDance, OpenAI, and Anthropic.

CEO Hock Tan said AI semiconductor revenue should double in Q1. Analysts expect earnings to grow 42% annually over the next two years.

But custom chips face challenges. They’re cheaper than Nvidia GPUs but require expensive custom software and optical interconnects. System-level costs often end up higher.

Broadcom trades at 50 times adjusted earnings. Analysts still see 35% upside with a median target of $461 per share.

MercadoLibre trades at 49 times earnings. Analysts expect earnings growth of 32% annually over three years. The median target price sits at $2,842, implying 42% upside from the current price of $1,998.

Latin America’s e-commerce market is projected to grow at 17.4% annually through 2030. Rising incomes and internet access will fuel that expansion.

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