MercadoLibre's new bond prices the cost of its 75% credit boom
MercadoLibre is paying 6.139% for ten-year money to keep a credit book growing 75% a year. The street cannot agree what that is worth: a $2,450 Buy on the stock, a Hold on the new 2036s, and a Brazilian regulator's deadline that falls today.
Vincent Jiang · 3 min read
A Buy and a Hold on one balance sheet
MercadoLibre priced US$1.0bn of senior unsecured notes due 2036 on 9 September, a 5.850% coupon at a 6.139% yield, sold at 97.864% of face value 12. The proceeds go to general corporate purposes, the second dollar bond inside a year after US$750mn of seven-year notes last December 1.
The credit verdict landed on 1 October: Hold the new paper. The deal offered no new-issue concession, lifts total debt to US$14.18bn and gross leverage to about 3.64x, and adds US$58.5mn of coupon a year, offset by pro-forma liquidity coverage of about 1.10x; the desk prefers the shorter 2031s 3.
Total debt has grown two and a half times in three years
Data
| Total debt | |
|---|---|
| Q3 '23 | $5.24B |
| Q4 '23 | $5.33B |
| Q1 '24 | $5.29B |
| Q2 '24 | $5.4B |
| Q3 '24 | $6.32B |
| Q4 '24 | $6.85B |
| Q1 '25 | $7.73B |
| Q2 '25 | $8.98B |
| Q3 '25 | $9.88B |
| Q4 '25 | $11.39B |
| Q1 '26 | $12.35B |
| Q2 '26 | $13.18B |
The same company, at 45% upside
Equity research reads the same company the other way. New Street Research initiated coverage on 23 September at Buy, target US$2,450, about 45% above the 1 October close of US$1,685; 12 of 18 tracked analysts are at Buy, consensus target US$2,283 45. Zacks ranks the stock #4, Sell 6.
Sales accelerate while the margin halves
The debt funds a machine that grows revenue faster and keeps less of it. Second-quarter revenue ran US$10.17bn, up 49.8% year over year, while EPS fell to US$9.19 from US$10.31 5. The credit portfolio reached US$16.4bn, up 75%, on 2.6mn new cards against 1.6mn a year ago, and assets under management rose 68% to US$23.2bn 6. Net margin was 4.6% in the June quarter, against 10.5% in late 2024 7.
Sales growth is accelerating while the margin left over has halved
- Revenue growth, YoY
- Net margin
Data
| Revenue growth, YoY | Net margin | |
|---|---|---|
| Q3 '24 | 35.3% | 7.5% |
| Q4 '24 | 37.4% | 10.5% |
| Q1 '25 | 37% | 8.3% |
| Q2 '25 | 33.8% | 7.7% |
| Q3 '25 | 39.5% | 5.7% |
| Q4 '25 | 44.6% | 6.4% |
| Q1 '26 | 49% | 4.7% |
| Q2 '26 | 49.8% | 4.6% |
The coupon also lands in the hardest rate window in two decades. Morgan Stanley's Amy Gower describes long-dated bond yields at 20-year highs, in a market that anticipated and is now delivering Fed rate hikes 8.
The other side of the trade
The bull case has receipts: 15-to-90-day NPLs at 7% of the book and 4.6% of cards, both near historical lows 6; the offering drew demand from more than 100 institutional investors 9; 107 hedge funds held the stock at the end of June, up from 82 2. The bear answer is arithmetic: an issue price of 97.864 means the coupon understates the true cost, and 33.1x forward earnings against a 20.2x industry leaves little cushion 26.
The regulator's clock runs out today
The pharmacy leg of the same whole-customer push is paused in Brazil. Anvisa notified Mercado Livre four days after it announced prescription-drug sales with one-hour delivery, and ordered it to stop hosting, publicizing or facilitating medicine sales until the operation is proven regular 1011.
Documents were due 1 October, and Anvisa says no current norm authorizes a marketplace intermediating drug sales 1011. Pharmacy chains RD Saúde, Pague Menos and Panvel fell 5.4%, 8% and 4.9% the day of the announcement 12.
Pharmacy shares fell up to 8% on the drug-sales news
Data
| Value | |
|---|---|
| RD Saúde | -5.4% |
| Pague Menos | -8% |
| Panvel | -4.9% |
The company says it has received no notification and complies with all applicable rules. It says it is in contact with the regulator 1011.
What settles it
The split resolves into one question: own the growth as equity, or lend to it at 6.139%. The Hold means a buyer of the 2036s takes ten years of duration with no new-issue concession, while gross leverage climbs with a credit book compounding at 75%; the wager underneath is that 7% NPLs hold near historic lows through a hiking cycle. The equity case is the same growth the bond funds, priced at 33x forward earnings 6.
Two dates discipline both sides: Anvisa's ruling on the drug marketplace, and the next quarterly report's leverage and margin lines, which show whether the 6.139% carry is buying compounding or balance-sheet stretch. Until then, one sentence carries the whole trade: growth at 50% a year now costs 6.139% for ten years.
Deepdive
AI-generated from this story and its cited sources. Not investment advice.
