MercadoLibre (MELI) shares have declined 13% in the last three months, underperforming the Retail-Wholesale sector and Internet-Commerce industry. The company’s rapid credit expansion and heavy dependence on Latin American markets are raising investor concerns about future earnings and business momentum.

MELI’s fintech arm, Mercado Pago, is experiencing unsustainable growth with a 40% increase in revenues year over year. However, the credit portfolio has surged 91%, raising concerns about asset quality and discipline. The company’s exposure to credit-driven growth poses risks to future earnings and balance-sheet resilience.

Intense competition from Amazon, Sea Limited, and eBay is challenging MELI’s leadership in Latin America. Amazon’s logistics expansion, Shopee’s rise in Brazil and Mexico, and eBay’s cross-border marketplace are reshaping the e-commerce landscape. MELI’s response to these competitors is impacting its efficiency and market share in price-sensitive categories.

MELI’s reliance on Brazil, Argentina, and Mexico exposes it to regional volatility and currency risks. The company’s concentrated exposure to these markets leaves it vulnerable to policy shocks and economic instability. With limited geographic diversity, MELI’s earnings outlook is sensitive to macroeconomic conditions in Latin America.

MELI’s premium valuation relative to the industry and sector, coupled with its challenges in credit expansion, regional concentration, and competition, make the stock unattractive at current levels. The company faces risks to earnings visibility and growth amid moderating momentum and persistent uncertainty in Latin American markets. Investors should consider these factors before investing in MELI.

Read more at Nasdaq: MELI Falls 13% in Three Months: Should You Hold or Fold the Stock?