Could buying this growth stock be like investing in Amazon in 2011?

This e-commerce giant has been taking pages out of Amazon’s book and generating explosive growth that could propel it to similar heights in the long run.

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Growth stocks typically come with more risk. But when successful, these enterprises can deliver staggering returns as many shareholders of Amazon have discovered. The e-commerce giant has dominated its industry in North America, the UK, and Europe. And as a result, investors who bought £10,000 of shares back in 2011, are now sitting on a nest egg worth almost £200,000!

At a market capitalisation just shy of $2trn, Amazon shares are unlikely to repeat this stellar performance any time soon. But despite its success at home, the firm has struggled to penetrate other international markets such as Latin America. There are numerous reasons behind this but the most prominent is a little-known enterprise called MercadoLibre (NASDAQ:MELI).

The opportunity of a lifetime?

MercadoLibre is a very similar company to Amazon. It also offers an e-commerce platform for merchants, with its own fulfilment network and even a Prime-like subscription service called Meli+.

The firm has been following a very similar playbook to its American rival. But there’s a key difference. MercadoLibre isn’t venturing into cloud computing like Amazon did. Instead, management opted for a different strategy, focusing on digital payment processing.

This fintech-oriented strategy seems to have been a stellar move and is a big contributor to the group’s overall success and growth so far. And given the global digital payments market is estimated to be more than 10 times bigger than global cloud computing, MercadoLibre could be set to eventually surpass Amazon in the long run.

With a market cap of $81bn, the shares are currently trading at the same price point as Amazon did in 2011. And we’ve already seen a glimpse of what sort of returns may emerge over the next decade.

Digging into the numbers

The firm’s first quarterly results for 2024 continued to deliver stellar growth to shareholders. Gross merchandise volume expanded by 20% year-on-year, reaching $11.4bn with 385.1 million items sold across all its markets. That led to a net revenue growth of 30% and a 44% jump in operating income on the back of expanding profit margins.

Over on the fintech side of the business, monthly active user growth is still accelerating. And it reached 49m this quarter – that’s 90% higher than a year ago as Mercadolibre takes even more market share in Mexico, Brazil, and Argentina.

The company has a knack for defying expectations and beating analyst forecasts. However, despite its terrific track record, MercadoLibre isn’t without its flaws. And the biggest threat investors have to consider is the political and economic instability of the Latin American market.

We’ve already seen the impact of such headwinds in 2019 when management reduced its exposure and, subsequently, opportunities in Venezuela. And today, Argentina is the main concern.

Having suffered through global record-high inflation, the new President, Javier Milei, has introduced some pretty radical fiscal reforms. These have successfully brought down inflation, as promised. But it’s also triggered a massive contraction in consumer spending as Argentina tumbles into recession.

Considering Argentina was responsible for around a quarter of Mercadolibre’s sales in 2023, the economic conditions are problematic. However, this isn’t the first time management has had to navigate adverse conditions. And with a solid track record, it’s a risk I feel worth taking. That’s why I’ve already bought its shares for my growth portfolio.

Should you invest, the value of your investment may rise or fall and your capital is at risk. Before investing, your individual circumstances should be assessed. Consider taking independent financial advice.

John Mackey, former CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. Zaven Boyrazian has positions in MercadoLibre. The Motley Fool UK has recommended Amazon and MercadoLibre. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

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