Will MercadoLibre Be Profitable Again?

MercadoLibre (NASDAQ: MELI), the largest online commerce ecosystem in Latin America, has seen its shares soar more than 75% in 2020. Due to its sole focus on providing e-commerce and digital payments services, the company has benefited tremendously from the coronavirus pandemic and shelter-in-place restrictions in the countries it operates in.

The platform's unique active visitors and revenue grew 31% and 38% in the first quarter of 2020, respectively. However, after last reporting profits in 2017, the company has incurred net losses in each of the last two years. Why has the once profitable operation been losing money? And will it be profitable again?

MercadoLibre wants to build out the infrastructure to support a thriving digital economy in a developing region of the world with a population of over 640 million people. An endeavor like this requires significant expenses in order to achieve scale and reach a dominant position. Additionally, the platform nature of the business characterizes a winner-take-all market -- the company has the ability to serve everyone, the service gets better with each additional user, and the marginal cost to serve another user is essentially zero.

Source Fool.com