MercadoLibre (MELI) Stock Drops 7% After JPMorgan Pulls Its Buy Rating

TLDR

• MELI is down 6.8% today and 37% from its 52-week high of $2,614, currently trading around $1,649
• JPMorgan downgraded MELI from Overweight to Neutral, cutting its price target from $2,650 to $2,100
• JPMorgan expects MELI’s 2026 margins to come in ~1.8 percentage points lower, about 15% below consensus
• Competition from Amazon and Sea Limited’s Shopee in Brazil continues to pressure margins
• MELI’s net income grew just 5% in 2025 despite 44% revenue growth, hurt by rising bad loan provisions

MercadoLibre’s rough patch got rougher on Thursday. The Latin American e-commerce and fintech giant fell 6.8% in afternoon trading, adding to losses that have now pushed the stock down nearly 37% from its June 2025 peak of $2,614. At around $1,649, investors who were riding high last summer are feeling the pain.

MercadoLibre, Inc., MELI

Today’s drop was partly macro-driven. Escalating U.S.-Israeli military action against Iran sent oil prices surging, rattling global markets. Goldman Sachs flagged a 25% chance of a U.S. recession over the next year. The S&P 500, Dow, and Nasdaq all fell around 1% as investors moved toward safer ground.

But MELI’s problems go beyond oil prices and geopolitics.

JPMorgan Pulls Its Overweight Rating

JPMorgan downgraded MercadoLibre to Neutral from Overweight on Thursday, trimming its price target from $2,650 to $2,100. The bank cited ongoing competition in Brazil and near-term margin pressure as the key reasons for the change.

MELI’s CFO indicated the company is comfortable operating at margins of around 9% in the near term. That spooked analysts. JPMorgan cut its 2026 margin estimate to 8.8% and now expects MELI’s earnings before interest and tax to land about 15% below consensus for the full year — and roughly 24% below expectations in Q1 2026 alone.

The bank also reduced its long-term margin assumption to 14%, down from 17%, citing limited visibility on when profitability will improve.

Sea Limited’s Shopee is not backing down in Brazil either. The company plans to plow savings from changes to its take-rate structure back into discounts tied to Brazil’s Pix instant payment system, keeping competitive pressure high.

The Numbers Tell the Story

MELI’s 2025 full-year results were a mixed bag. Revenue hit $29 billion, up 44% year over year — that’s the kind of growth most companies can only dream of. But net income rose just 5% to $2 billion.

The culprit: a 66% jump in provisions for doubtful accounts, tied to aggressive expansion of its loan portfolio. Credit grew 90% in Q4 2025. Operating margin slipped to 11.1% from 12.7% in 2024.

The company has since moved to tighten credit standards, setting stricter limits on loan sizes. It’s also using AI and customer data to better identify higher-risk borrowers.

On the e-commerce side, Amazon continues to chip away at MELI across multiple Latin American markets, adding another layer of pressure.

Argentina, Venezuela, and the Bigger Picture

There are some bright spots in the macro backdrop. Argentina’s poverty rate has dropped, even as inflation stays elevated at around 32%. In Venezuela, oil exports have reached their highest level since 2018 following a leadership change — a sign of improving economic conditions in a key market.

JPMorgan still sees long-term earnings growing at a compound annual rate of around 32% between 2026 and 2029. However, it does not expect the market to price that in during 2026 given how much near-term uncertainty remains.

MELI’s P/E ratio has now fallen to around 44. The stock is down 16.5% year-to-date.

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