valuevelli

The answer is provisions. Provisions for credit losses go directly against net income as a loss today. $MELI has 100%+ of all NPLs already provisioned (written off against earnings, and cash set aside to absorb all of them). This basically means that if the NPL goes truly bad, it's already written off, doesn't effect earnings, and is absorbed by the cash already set aside. So no, revenue and earnings are not inflated. If anything, you could argue they're under-reported, as they assume 100%+ of provisions will go bad.

$PYPL went from a market darling to completely out of favor. Price history: 2015: ~$40 2021 peak: ~$300 Today: ~$45 Back to where it traded a decade ago. Yet revenue, users, and payment volume are all far higher. The question now: Is PayPal ex-growth or just mispriced?

Nick Sleep once wrote about Amazon’s “price givebacks” — reinvesting today by lowering prices and building scale so that free cash flow is much larger in the future. Many investors misunderstood this. They looked at low current cash flow and concluded the investments had no value. But what they missed was the flywheel: scale → lower prices → more volume → stronger long-term economics. This framework also helps explain $MELI. MercadoLibre has consistently reinvested into logistics, payments, credit, and pricing across Latin America. Short term? Lower margins. Long term? A larger ecosystem, higher volume, and a much stronger moat. Just as Nick Sleep observed with $AMZN, the market often struggles to properly value investments that depress profits today but expand the opportunity tomorrow. Sometimes what looks like lower profitability is actually the deliberate building of scale economies shared.

$MELI is not an ecommerce company Most people still think $MELI is an ecommerce company. That’s not really the right way to think about it. What $MELI built over time is a commerce flywheel ecosystem where one transaction powers several different businesses at the same time. A buyer goes on the marketplace and purchases a product from a seller. It looks like a normal ecommerce order, but inside a lot more is happening. The seller may have paid for advertising to show up higher in search results, the buyer often pays through MercadoPago so $MELI makes processing fees, the package is fulfilled and shipped by Mercado Envios, the merchant may be using $MELI fulfillment network, and the buyer or the seller may be using financing through MercadoCredito. Because of that, the same transaction can produce several revenue streams. The company can earn marketplace fees, payment processing revenue, advertising income, logistics revenue, and sometimes credit interest all from the same purchase. Most ecommerce companies monetize only the marketplace itself, while MercadoLibre captures value from several businesses on the same activity. This is where the flywheel starts getting stronger. More buyers attract more sellers. More sellers improve the selection of products. Better selection brings more buyers back to the platform. As orders increase the logistics network becomes more efficient, payments volume grows through MercadoPago, and the credit business improves because $MELI sees transaction data from millions of merchants and consumers. Another useful way to think about the business is how much of the transaction the platform captures. A typical marketplace might take commission on a $100 purchase. $MELI can earn money from payments, shipping, advertising, and financing from that same purchase, which means the platform captures a larger portion of the economic activity flowing through it. This is also why comparisons with $SE or $AMZN don’t fully explain the story. Shopee is a strong marketplace but its ecosystem is less integrated, and $AMZN operates in markets where payment and credit already exist so it never had to build those itself. Latin America forced $MELI to solve payments, logistics, and credit at the same time. Over time those solutions became part of the platform itself, which is why $MELI now looks less like a simple ecommerce site and more like the infrastructure behind digital commerce in the LATAM region. 🌹