NeutralMELIMercadoLibreMercadoLibreSESeaSea

Yesterday on

The chart shared by @Brian_Stoffel_ below caught my interest. $SE $MELI For three quarters in a row, $SE's Shopee sales and marketing spend grew 40%, 57%, and 60% while GMV growth slowed from 30% to 23%. My first instinct was to think some e-commerce marketing simply pays off with a delay, so I pulled the same numbers for Mercado Libre to get a feel for it (I was too lazy to add Q2 and Q3 to my NotebookLM file, so keep that in mind). MELI went through a similar step-up in spending. Consolidated group S&M (so it's not as clean; it also funds Mercado Pago customer acquisition, especially the credit card push, so not every dollar targets commerce GMV) ran at roughly 4.2% of GMV throughout 2024, crept up to around 4.6% in 2025 and jumped to 5.75% in Q4 2025 and 5.2% in Q1 2026. Over the same stretch, GMV growth in USD went from 8% to 42%. A decent chunk of that acceleration is currency. In FX-neutral terms, growth stayed in the mid to high 30s for most of 2025, with a spike to 45% in Q4. Still, MELI’s extra spending came with growth that held up and improved. Shopee’s own history is the better test of the lag idea. When it ramped up S&M in the second half of 2023, GMV responded within a quarter and swung from -5% to +28%. When it cut S&M back to negative growth in late 2024, GMV kept growing at around 24%. To me that suggests the payoff from e-commerce marketing arrives quickly and fades slowly. Habits bought with vouchers stick around for a while. That makes the current picture hard to explain away as a lag. Shopee has now spent three quarters at 40%+ S&M growth while GMV decelerates. TikTok Shop has grown its share of the combined Shopee, TikTok Shop and Lazada GMV in Southeast Asia from 17% in 2023 to 39% in H1 2026. In Brazil, Shopee is fighting MELI, TikTok Shop and Temu at the same time. A large part of Shopee’s marketing line is vouchers and coins, which act like price cuts. TL;DR: At a quick glance, $MELI looks like spending that is being converted into growth, while $SE right now looks like spending that is mostly holding ground.

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2d ago on

I'm mostly thinking out loud here, prompted by the chart of Mercado Libre's Q3'26 credit portfolio shared by David below. $MELI Leaving aside the small asset-backed bucket, the average loan duration is roughly three months, so the whole book turns over about once a quarter. One instinct I had was whether there are similarities to Interactive Brokers, which keeps its float in short-term instruments while peers like Schwab reached for yield with longer-dated securities, and with the 2022 bank failures, when long-duration assets met flighty deposits. On that axis, I think the comparison holds. A book that runs off every three months can be repriced almost immediately when rates move, repays itself without forced sales, and roughly matches the short deposit base of Mercado Pago. SVB had none of those things. Where I hesitate is credit risk, which was never the 2022 problem and is Mercado Libre's main exposure/risk highlighted by bears. And they are right in that short duration doesn't make a borrower less likely to default. What it gives management is speed – losses show up quickly, and if a cohort goes bad, underwriting can be tightened and the book shrunk within a quarter or two. Origination is rolling, but annual originations come to roughly four times the average book, so Mercado Libre underwrites about four books' worth of loans every year to keep one on the balance sheet, which is also why its annualized loss ratios look high next to a bank's. Credit cards, now close to half the portfolio, are the weakest case for the duration argument. The 2.7-month figure reflects billing cycles, while the credit lines stay open and tend to get drawn down when times get tough. The second variable I find interesting is ticket size. Average exposures of around $222 for consumer loans and $445 for cards mean no single default matters, the loss rates become statistically predictable, and Mercado Libre can start new-to-credit customers with tiny limits and raise them as repayment history builds. Only a lender that originates almost for free inside its own ecosystem can do that profitably. The flip side is that granularity removes idiosyncratic risk and leaves something close to pure macro risk. When the Brazilian or Mexican consumer weakens, millions of small borrowers weaken together, and a $222 loan is not small for many of them. So short duration and small tickets make this book far more resilient than a traditional bank's in a rate shock, and more manageable in a credit downturn, without making it immune to one.

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5d ago on

Here is one comment that I discovered in my $MELI research that has stuck with me since: "Bob, so the margin structure for the advertising business is fairly consistent across geographies. It's a very high-margin business. I think we've set EBIT margins in the high 70s, low 80s. Attach rates or adoption do vary by geography. Mexico is the country with the highest attach rate." - Q3 2022 Call

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5d ago on

Offence or defence – why the reason behind a pivot matters more than the pivot itself After Mercado Libre $MELI reported yesterday, a reader asked me whether the company is essentially being forced to depress its margins because competition is heating up. It is a fair question, and it reminded me of a distinction I wrote about a long time ago and could not find again, so I will reconstruct it from memory. Whenever a company moves into new markets, adds products or accepts lower margins, I think the most important question is whether it is acting from a position of strength or from a position of weakness. On the income statement the two can look almost identical, while the underlying reality could hardly be more different. A defensive pivot happens when the core business, its DNA and its competitive advantages are under siege or already eroding. Management has to move, and it has to move under constraints – limited time, because the moat keeps shrinking while it acts, and often limited cash, because the core that is supposed to fund the new venture is itself weakening. For anyone with a five-year horizon that combination matters enormously, since the company is placing bets with a clock running and a smaller wallet. Nike is a good recent case. $NKE The push into direct-to-consumer at the expense of wholesale partners was framed as strategy, yet the later reversal, the lost shelf space to On and Hoka and the scramble back to running and to wholesale look much more like a company reacting to a brand that had lost its heat. Novo Nordisk $NVO fits here in a way too – cost cuts, layoffs, price reductions and a race for the next generation of obesity drugs while Eli Lilly takes share. The historic examples are almost painfully clear. Kodak, Nokia and BlackBerry all made moves, some of them sensible on paper, but they made them late, from a shrinking base and at a point where the market had largely decided the outcome already. Intel's foundry ambitions arguably belong in the same bucket. An offensive move looks very different. The core is healthy, often accelerating, and management chooses to reinvest its cash flows into adjacent opportunities that widen the total addressable market. This is where Mohnish Pabrai's idea of spawners comes to mind – businesses with a culture and a management team capable of repeatedly giving birth to new businesses. Amazon $AMZN is the textbook case. Retail funded the marketplace, the marketplace needed logistics and Prime, the internal infrastructure became AWS, and the traffic turned into an advertising business larger than most retailers. Each step grew out of capabilities the company had already built, and none of them was forced. An older example is Apple building the iPhone while the iPod was still at its peak, knowingly cannibalising its own bestseller before someone else could. I would place Mercado Libre firmly in the offensive camp historically. Mercado Pago started as a fix for a trust and payments problem inside the marketplace and grew into one of Latin America's leading fintech platforms, with credit, advertising and logistics following the same pattern of solving the company's own problems first and then selling the solution. The current margin pressure comes from things like lower free-shipping thresholds in Brazil, a growing credit book that front-loads provisions and heavy investment in fulfilment. Competition from Shopee, Amazon and the Chinese platforms is real, and I would not pretend otherwise. The question is if Mercado Libre is spending because it must or because it can. The signals I watch are whether market share and item growth respond to the investment, whether the spending is funded comfortably from operating cash flow, and whether the unit economics of newer credit and logistics cohorts hold up. Defensive companies tend to see spending rise while share falls. Offensive ones see spending rise while share holds or grows.

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6d ago on

The market will keep being disappointed by Mercado Libre‘s $MELI reinvestment hunger and willingness to sacrifice margins. And I will keep buying. Pretty happy with the position weight now but let’s see how low the stock can go. https://t.co/kFkrsV1xWH