MercadoLibre (MELI) & Nu Holdings (NU) – Meli Pedal to the Medal – March 30, 2024
MercadoLibre will reportedly increase growth investments in Brazil to $4.6 billion in 2024. That represents 20%+ Y/Y growth following closer to 10% Y/Y growth last year. The funds will be used to expand and improve its logistics network, with new distribution centers (already discussed on previous earnings calls). It will also increase investments in Mercado Pago (fintech arm) with new investing, insurance and credit products. Advertising was the other investment area mentioned. Its overall goal is to continue raising its market share in what is its largest market. Notably, easier macro expectations in Brazil are contributing to confidence in this added aggression.
For MercadoLibre, this is encouraging news. Its most important market is showing strong economic resilience. So? It can sink its teeth back into the masterful playbook that has allowed it to establish dominance there for decades.
For Nu? This is mixed news. MercadoLibre is targeting growth spending within Nu’s bread and butter (in Nu’s largest market). Competition isn’t new for either, and share gains will likely continue to come from slower incumbents. Still, Meli is a more intimidating competitor than any of those incumbents, and is making Nu’s territory a key focus. Conversely, easier macro in Brazil would be fantastic news for Nu. It would greatly diminish any credit resilience concerns and it would likely mean accelerating origination growth too. Brazil (and Colombia) are two of the best nations in the world in terms of high interest rates and low inflation. There’s plenty of room to cut to keep this economic strength humming. I am continuing to work on my Nu investment case. Meli will come after that. Stay tuned.
