- Net Revenue Growth: Q4 net revenues surged 45% YoY, driven by commerce acceleration and fintech adoption, with Brazil contributing a 45% YoY top-line increase.
- AI-Driven Advertising: AI-powered tools in advertising generated 67% revenue growth, enhancing seller returns through automated bidding and campaign management.
- Credit Portfolio Expansion: Mercado Pago's credit portfolio nearly doubled YoY to $12.5 billion, with assets under management reaching $19 billion at 78% YoY growth.
- Credit Card Issuance: Credit cards issued tripled from 1.5 million in Q2 to 3 million in Q4, with Brazil driving early growth and Argentina/Mexico fueling Q4 expansion.
- Shipping Efficiency Improvements: Lower shipping thresholds in Brazil boosted growth metrics, while volume and tech advancements reduced costs and improved the new shipping model's cost correlation.
Commerce and Fintech Growth
In Brazil, GMV grew 35% year-over-year, alongside a 45% increase in sold items. The company's investments in artificial intelligence are driving revenue growth, particularly in advertising, where AI-powered bidding algorithms and automated campaign tools generated better returns for sellers, driving 67% growth. AI is also transforming the effectiveness of the acquiring sales force, with acquiring TPV growing 25% in Brazil and 50% in Mexico.
Credit Portfolio Expansion
Mercado Pago's credit portfolio nearly doubled year-over-year to $12.5 billion. Assets under management are close to $19 billion, growing at 78% year-over-year. The company's credit book is growing at 90%, driven by healthy growth and pricing risk accordingly. The integration of credit card offers in the checkout and improved credit models have driven growth in credit card usage.
Valuation and Outlook
With a P/E Ratio of 44.88 and an EV/EBITDA of 24.22, the market is pricing in significant growth expectations. Analysts estimate next year's revenue growth at 22.8%. Given the company's strong track record of growth and its expanding presence in Latin America's e-commerce and fintech landscape, it's reasonable to expect continued momentum. The company's focus on building its own shopping assistant to provide the best end-to-end experience for consumers is also a positive development.
Key Drivers and Risks
The synergy between the marketplace and Mercado Pago is significant, with double-dipping opportunities. However, the credit card business is not yet profitable on average but is expected to be so as it matures. In Brazil, cohorts older than 2 years are already profitable at a Net Interest Margin After Losses (NIMAL) level. The company's investments in technology to improve the product discovery process and drive online retail penetration in Latin America are also a key driver of growth.