Pablo Zapata A.

[Pablo Zapata A. @pabloza]

Strong Fundamentals, Weak Price Action: The MELI Disconnect. I’m convinced this is one of the biggest compounders in LatAm

[Rose Celine Investments 🌹 @realroseceline]

$MELI

The market is focused on margins compressing, operating income declining 20%, and some experimentation with the credit products but underneath the surface this may have actually been one of the strongest strategic quarters in $MELI history. Revenue grew 49% to $8.8b, TPV grew 50% to $87b, and GMV grew 42% to $19b.

This is not a mature company struggling to grow a few extra percentage points. This is a company already operating at massive scale while still growing like a startup. The really important thing is that growth is actually accelerating in several key areas even while they are intentionally sacrificing short term profitability. There’s a big difference between weak margins caused by weakening demand and weak margins caused by aggressive reinvestment.

The entire philosophy behind this quarter is actually pretty simple. $MELI believes Latin America is still extremely early in the digital commerce and fintech transition, so management is choosing to maximize long term ecosystem dominance instead of optimizing near term margins. Honestly, when you look at the underlying numbers, it becomes pretty hard to argue against that logic.

The average American makes around 40 online purchases per year while the average Latin American makes just 7. Even buyers on $MELI only average around 11 purchases annually today, which means ecommerce penetration still looks extremely early. If management believes that number can eventually double or triple over time, then aggressively investing today probably makes a lot of sense.

The lower free shipping threshold in Brazil is probably the clearest example of this strategy. Most investors initially saw it as margin destruction, but $MELI clearly views it as long term habit formation. After lowering the threshold, Brazil GMV growth accelerated to 38%, items sold growth accelerated to 56%, and unique buyers accelerated to 32%, the fastest growth in five years.

What stood out to me most was that daily active users are now growing faster than monthly active users. That usually means engagement itself is deepening, not just user acquisition. Anyone can temporarily buy growth through promotions, but when conversion, frequency, and retention all improve simultaneously, it usually means consumer habits are actually changing. That’s where internet businesses become extremely powerful.

What makes this even more interesting is that the economics are already improving faster than expected. Unit shipping costs in Brazil declined 17% versus 11% last quarter, and almost half of the profitability hit from the lower shipping threshold has already been offset through efficiency and scale of logistics. They said that lower cost shipments are already breakeven.

This is basically the classic ecommerce flywheel playing out in real time. Lower shipping costs improve conversion, better conversion drives higher order density, and higher density improves logistics efficiency which lowers costs further. Over time, the ecosystem becomes stronger and more profitable because scale itself becomes the advantage. That is exactly why companies like $AMZN became so dominant over time.

I also think people massively underestimate the importance of the logistics network itself. $MELI now operates more than 50 fulfillment facilities and fulfillment handled 55% of shipments during the quarter while growing 39%. The moat is no longer just the marketplace or app itself. The moat becomes warehouses, delivery routes, seller relationships, underwriting data, payments infrastructure, advertising infrastructure, and consumer habits all compounding together into one ecosystem.

1/ 👇

[Rose Celine Investments 🌹 @realroseceline]

$MELI

The market is focused on margins compressing, operating income declining 20%, and some experimentation with the credit products but underneath the surface this may have actually been one of the strongest strategic quarters in $MELI history. Revenue grew 49% to $8.8b, TPV grew 50% to $87b, and GMV grew 42% to $19b.

This is not a mature company struggling to grow a few extra percentage points. This is a company already operating at massive scale while still growing like a startup. The really important thing is that growth is actually accelerating in several key areas even while they are intentionally sacrificing short term profitability. There’s a big difference between weak margins caused by weakening demand and weak margins caused by aggressive reinvestment.

The entire philosophy behind this quarter is actually pretty simple. $MELI believes Latin America is still extremely early in the digital commerce and fintech transition, so management is choosing to maximize long term ecosystem dominance instead of optimizing near term margins. Honestly, when you look at the underlying numbers, it becomes pretty hard to argue against that logic.

The average American makes around 40 online purchases per year while the average Latin American makes just 7. Even buyers on $MELI only average around 11 purchases annually today, which means ecommerce penetration still looks extremely early. If management believes that number can eventually double or triple over time, then aggressively investing today probably makes a lot of sense.

The lower free shipping threshold in Brazil is probably the clearest example of this strategy. Most investors initially saw it as margin destruction, but $MELI clearly views it as long term habit formation. After lowering the threshold, Brazil GMV growth accelerated to 38%, items sold growth accelerated to 56%, and unique buyers accelerated to 32%, the fastest growth in five years.

What stood out to me most was that daily active users are now growing faster than monthly active users. That usually means engagement itself is deepening, not just user acquisition. Anyone can temporarily buy growth through promotions, but when conversion, frequency, and retention all improve simultaneously, it usually means consumer habits are actually changing. That’s where internet businesses become extremely powerful.

What makes this even more interesting is that the economics are already improving faster than expected. Unit shipping costs in Brazil declined 17% versus 11% last quarter, and almost half of the profitability hit from the lower shipping threshold has already been offset through efficiency and scale of logistics. They said that lower cost shipments are already breakeven.

This is basically the classic ecommerce flywheel playing out in real time. Lower shipping costs improve conversion, better conversion drives higher order density, and higher density improves logistics efficiency which lowers costs further. Over time, the ecosystem becomes stronger and more profitable because scale itself becomes the advantage. That is exactly why companies like $AMZN became so dominant over time.

I also think people massively underestimate the importance of the logistics network itself. $MELI now operates more than 50 fulfillment facilities and fulfillment handled 55% of shipments during the quarter while growing 39%. The moat is no longer just the marketplace or app itself. The moat becomes warehouses, delivery routes, seller relationships, underwriting data, payments infrastructure, advertising infrastructure, and consumer habits all compounding together into one ecosystem.

1/ 👇

[Rose Celine Investments 🌹 @realroseceline]

$MELI

$MELI margins right now are under a microscope but ofcausre that not the right thing to focus on. When people see margins come down, the instinct is to assume something is breaking. But nothing is breaking because they are choosing to reinvest aggressively, and that is a very different thing.

Most investors are asking, “Why are margins going down?” The better question is, “What would margins look like if they stopped investing?” Because if $MELI pulled back on logistics, slowed credit, and reduced subsidies, margins would expand almost immediately. But the business would also slow down, lose momentum, and weaken its long term position.

In other words, margins are not being pressured by the market. They are being compressed by choice. That distinction is huge, and most people, particularly analysts miss it.

If you step back, this is not really an ecommerce story anymore. It is an infrastructure story of Latin America. Commerce is just the entry point, but the real value lies in payments, credit, logistics, and data are all being layered together into one ecosystem system.

Right now $MELI is doing a few things at the same time, and all of them pressure margins in the short term. They are subsidizing shipping to improve the customer experience and drive frequency. They are expanding credit, which adds risk but also deepens engagement and increases lifetime value. And they are continuing to build out their logistics network, which is expensive today but critical long term.

If you only look at margins, you will miss what is actually happening. Because these are not random expenses, they are deliberate investments to scale and improve the ecosystem. Buyers get better service and more access to credit, while sellers get better tools, distribution, and fulfillment.

The best companies often look inefficient at the wrong time. They spend ahead of revenue, build infrastructure before it is fully utilized, and take losses in areas that later become dominant later. $AMZN looked inefficient for years, and that inefficiency was actually the moat being built.

What looks inefficient today in $MELI may simply be the early stage of something that becomes extremely efficient later. This is what I think of as “controlled inefficiency”. You are absorbing costs today to create advantages that are very hard to replicate tomorrow.

The most important piece of this entire story is Mercado Pago. Payments are already massive, but what matters is how far this can go. Over time, this can become a full financial ecosystem where users store money, pay, borrow, and even invest.

In many parts of Latin America, this is not competing with a great banking system. It is replacing a weak one. That is a much bigger opportunity than just taking share in ecommerce, and more like $NU.

If $MELI owns the checkout, the wallet, the credit, and the merchant relationship, then they are not just participating in transactions. They are controlling the flow of money. And once you control the flow, you can monetize it in multiple ways.

Payments, lending, ads, logistics, and software all build on each other. This is how platforms become ecosystems, and ecosystems tend to get stronger over time, not weaker.

On commerce, the same thing is happening with logistics. Today it looks like a big cost, which is why margins are under pressure. But over time, as volume scales, logistics becomes a moat that lowers cost per order, improves delivery times, and makes the platform harder to compete with.

There is also a piece here that most people are not paying attention to yet, and that is advertising. $MELI has mountains of intent data, transaction data, and financial data. That combination is incredibly valuable, and it allows them to build a very high margin ads business over time. It’s literally GOLD!

1/2

[Nicolas Bustamante @nicbstme]

https://t.co/v7sot4WCI2

[Alfred Lin @Alfred_Lin]

https://t.co/IO5GIKkX6A

[Patrick OShaughnessy @patrick_oshag]

Excellent from Scott

[Emad @EMostaque]

Found it easier to hire for a quality in AI than crypto despite supply being way smaller

Think it’s because crypto messes a lot of folks brains tbh so fit and alignment are tougher as folk forget they need to build useful stuff and that takes time

[Niall Ferguson @nfergus]

Coming up in 15 minutes ...

[Elon Musk @elonmusk]

AP stands for Associated Propaganda

[Elon Musk @elonmusk]

Absolutely

[Elon Musk @elonmusk]

Interesting

[Frederik Gieschen @FrederikNeckar]

https://t.co/RWMEGswO13

[modest proposal @modestproposal1]

Gorton also reiterates his view that financial crises are all about short term debt, and in this case the short term debt at root of the crisis was uninsured deposits. Says moral hazard is not a thing. And is very very worried about stablecoins.

[Pablo Zapata A. @pabloza]

@bgurley @MichaelDell Loved it! Michael’s story is so inspiring.

[Eddie Fishman @edwardfishman]

The US just unveiled the details of its sanctions against the Central Bank of Russia. Bottom line: This is close to the most ambitious form that this action could take. Here's my initial analysis (🧵):

[Pablo Zapata A. @pabloza]

@WizardsDAO 0.47 ETH

[Pablo Zapata A. @pabloza]

@ApeRunners @0xbalapa F U E G O !!!!!

[Pablo Zapata A. @pabloza]

@Matshiba93 @kimbal 😂

[Dividend Growth Investor @DividendGrowth]

The biggest mistake an investor can make is to sell a stock that goes on to rise ten-fold.

It's not from owning something into bankruptcy

But that's what everyone thinks, at least judging by the questions we get from clients.

Nick Sleep