What Happened?

Shares of latin American e-commerce and fintech company MercadoLibre $(MELI)$ jumped 4.2% in the morning session after news of significant institutional buying, including a major investment from Michael Burry's Scion Asset Management, bolstered investor confidence. 

This move was largely driven by a wave of significant institutional investments, signaling strong confidence in the e-commerce giant's future. Notably, Michael Burry's Scion Asset Management purchased a substantial $7.84 billion stake in the company. Other institutional investors also increased their positions, with Ground Swell Capital LLC buying a new stake and GQG Partners boosting its holdings by 23.5%. This investor enthusiasm is backed by the company's strong performance, as it reported a 34% year-over-year revenue surge to $6.8 billion in its second-quarter 2025 results.

After the initial pop the shares cooled down to $2,402, up 3.5% from previous close.

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What Is The Market Telling Us

MercadoLibre’s shares are not very volatile and have only had 9 moves greater than 5% over the last year. In that context, today’s move indicates the market considers this news meaningful, although it might not be something that would fundamentally change its perception of the business.

The biggest move we wrote about over the last year was 9 months ago when the stock dropped 16.3% on the news that the company reported weaker third-quarter earnings. The main reason was that it missed on operating income margin because it ramped up investments in its credit and logistics businesses. Ramping up loan originations leads to the recognition of the allowance for doubtful accounts upfront (the expected losses on the loans). However, the new loan originations came from credit cards and moving up-market to higher-quality customers. Because these new accounts have lower default risk, the yields are lower and result in a lower blended NIMAL spread (aka margins). However, the new loans are additive to overall profit dollars, lower the risk of the broader credit portfolio, and increase MELI's market share and stickiness/wallet share with customers. On the other hand, MercadoLibre delivered impressive revenue growth this quarter. Overall, the stock is reacting to the bottom line miss.

MercadoLibre is up 36.1% since the beginning of the year, and at $2,402 per share, it is trading close to its 52-week high of $2,614 from June 2025. Investors who bought $1,000 worth of MercadoLibre’s shares 5 years ago would now be looking at an investment worth $2,019.

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