MELI Grew 49%. The Stock Is Near Its Lows.

Something happened on May 7th that the market reacted to badly and, based on the underlying numbers, probably got wrong.

MercadoLibre reported Q1 2026 earnings after the close. Revenue came in at $8.85 billion, up 49% year-over-year. That is the strongest growth pace since Q2 2022. The company beat analyst consensus on the top line by roughly 4.5%. Within hours, the stock dropped close to 13% in after-hours trading.

The reason: EPS of $8.23 missed one widely-cited estimate of $9.37. Operating income fell roughly 20% year-over-year to $611 million. Operating margin compressed 600 basis points to 6.9%. On the surface, that reads like a company losing its footing. What it actually reflects is a deliberate investment cycle that management has been signaling for several quarters.

The part people skip: the credit card portfolio more than doubled. Up 104% year-over-year to $6.6 billion. The company issued 2.7 million new cards in a single quarter. The broader credit portfolio grew 87% to $14.6 billion. That expansion is what is compressing margins. Free shipping thresholds were lowered, logistics infrastructure expanded, and first-party commerce investment accelerated. These are not signs of a business drifting. These are the costs of a business building at scale while the market is still developing around it.

The underlying growth metrics tell a different story than the EPS line.

• Revenue: $8.85B, up 49% YoY – fastest pace since Q2 2022
• Total Payment Volume: $87.2B, up 50% YoY
• Gross Merchandise Volume: $19.0B, up 42% YoY
• Unique Active Buyers: 84.1M, up 26% YoY
• Fintech Monthly Active Users: 82.9M, up 29% YoY
• Credit Portfolio: $14.6B, up 87% YoY
• Credit Card Portfolio: $6.6B, up 104% YoY – 2.7M new cards issued in Q1
• Advertising Revenue: up 73% YoY
• Assets Under Management: nearly $20B, up 77% YoY
• Operating Income: $611M at a 6.9% margin, down from 12.6% a year ago
• EPS: $8.23 (vs. Q1 2025 EPS of $9.74)

What’s interesting is the AUM figure. Assets under management grew 77% while fintech MAUs grew 29%. That spread matters. It means existing users are deepening their engagement with Mercado Pago, not just signing up and sitting idle. That is the kind of cohort behavior that shows up in revenue per user numbers later.

Slight tangent, but it matters here: Brazil had its fastest unique buyer growth in five years this quarter. Items sold jumped 56% year-over-year. Mexico revenue ran 62%. These are country-level acceleration numbers in markets where e-commerce penetration is still a fraction of what it is in the U.S. Latin Americans average roughly 7 online purchases per year. Americans average 41. That gap does not compress in one quarter. It compresses over years, and MercadoLibre is the infrastructure layer that sits underneath all of it.

Where the Stock Sits Now

MELI is trading around $1,663 as of late May. The 52-week range runs from $1,537 to $2,645. The stock is down roughly 37% from its 52-week high. The 50-day moving average is near $1,753 and the 200-day sits around $2,074. Both are above the current price, acting as resistance rather than support.

Analyst targets were adjusted post-earnings but remain substantially above current levels. Goldman Sachs moved to $2,100 from $2,440. JPMorgan lowered to $1,900 from $2,100. Barclays trimmed to $2,300 from $2,500 but held its Overweight rating. UBS cut to $1,750. Even the most conservative target on the Street is above where the stock is trading today. According to 25 analysts polled by S&P Global, the consensus average target sits at $2,230, implying roughly 34% upside from current levels. The consensus rating is Buy.

Over the last three years, earnings per share has grown at a 35% annualized rate. The stock has appreciated about 8% annually over the same period. That divergence is either a long lag that eventually closes or a signal that the market is skeptical of the margin trajectory. Both interpretations are reasonable. The credit card non-performing loan ratio at 15-to-90 days actually improved year-over-year, which is the one data point that gives the most credibility to management’s view that older cohorts are maturing as expected.

Here’s the thing about the operating margin compression: it is not permanent by design. Management has guided that as credit card cohorts age and the cost of acquiring new card customers gets absorbed, the margin pressure begins to ease. The question is not whether that happens. The question is when. And that is what the market is currently pricing as uncertain.

For traders with a short horizon, the technical picture is not constructive. The stock is in a falling trend channel, both major moving averages are above price, and the 3-month MACD remains on a sell signal. None of that changes the fundamental picture. It does mean the path from here to $2,230 is unlikely to be straight.

The actual risk worth monitoring each quarter: if Brazil’s consumer credit environment deteriorates faster than the underwriting models anticipate, non-performing loan trends could widen faster than cohort maturation can offset. That is the variable. Not the operating margin compression, which is intentional. The credit quality read-through from each quarter’s NPL data is what matters most going forward.

A business growing revenue at 49%, issuing 2.7 million credit cards in a single quarter, and expanding AUM at 77% annually is not a business in trouble. Whether the current price fully reflects that is a different question. The gap between where the stock is and where analysts think it should be is unusually wide right now.