It’s not often that investor Michael Burry turns publicly bullish on one of my top Stocks and Shares ISA holdings.
After all, the investor made famous by The Big Short film is a deep-value stock-picker, not a long-term growth investor like myself.
Yet he recently bought shares of MercadoLibre (NASDAQ:MELI), which by any definition is a high-calibre growth stock. The e-commerce and fintech powerhouse has grown revenue at a five-year annualised rate of about 53%!
Historically, this heady growth has commanded a high market premium. Last week though, the stock crashed around 16% after MercadoLibre’s first quarter earnings, taking the 12-month decline to 38%.
But is this dip a potentially lucrative buying opportunity to consider closely? Let’s take a look.
How does it make money?
MercadoLibre operates Latin America’s largest e-commerce marketplace across 18 countries. Due to its sprawling fulfillment network, which allows for the rapid delivery of items, it often gets called the ‘Amazon of Latin America’.
There’s some truth to that, as the company also has a Prime-like subscription service and TV streaming platform. And like Amazon, it boasts a fast-growing digital ad business (Mercado Ads), which saw revenue surge 73% in Q1.
A point of difference however, is that the firm doesn’t sell cloud services to others. Instead, it has a fintech unit (Mercado Pago) that offers credit and various other financial services to 83m people.
Why’s the stock crumbled lately?
The stock’s nosedived because Q1 showed that the operating margin shrank almost six percentage points to 6.9%. Below are some things hurting near-term profitability:
- Provisions for doubtful accounts (potential bad debt in its surging credit business).
- Massive logistics expansion in Brazil (it’s opening 14 fulfilment centres in 2026).
- Higher marketing spend.
In Brazil, its largest market, MercadoLibre has lowered the free shipping threshold. That’s great for customers, but investors fear this is due to rising competition from Amazon and Shopee.
This adds risk, for sure. However, it’s worth noting that Q1 revenue and financial income accelerated 49% to $8.84bn, including 55% in Brazil.
This was the company’s fastest quarterly growth in almost four years!
Arguably then, MercadoLibre is right to put the foot on the growth accelerator here, given the massive long-term opportunity.
We have a once-in-a-generation opportunity to transform how hundreds of millions of Latin Americans shop, pay and access financial services…The impact of our investments is visible today as a meaningful but deliberate compression of margins in the near term, but it is equally visible in accelerating growth, deeper engagement, greater scale, and a strengthening competitive position.
Q1 2026 report.
Back to Burry
Burry clearly views the recent sell-off as an opportunity. He wrote: “I expect long-term 15% annualised returns at 15 years or more”.
After the crash, the stock’s trading at 27 times next year’s forecast earnings. For a high-quality company still regularly posting 30%+ top-line growth, that’s cheap.
Especially when you consider that the average American makes 41 online purchases a year compared to just seven for Latin Americans.
As management points out: “The pie is increasing at a faster pace than it was before, and we are taking an even larger slice of that pie”.
I think patient investors should consider buying the dip today while the market worries about short-term margin pressure.
