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Mercadolibre (NASDAQ: MELI) stock tumbled 11% through 11:10 a.m. ET Friday after reporting mixed earnings for Q1 2026 last night.
Analysts had forecast the Latin American e-commerce giant would earn $9.37 per share on $8.3 billion in sales. Mercadolibre beat the sales forecast with $8.8 billion in revenue, but whiffed on earnings -- just $8.23 per share.
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Mercadolibre's sales surged 49% year over year as the company worked to grow its business now, and worry about profits later -- to ill effect. Operating income declined 20% year over year as the company ate more of the cost of free shipping in markets such as Brazil and made other growth investments.
GMV grew 28% year over year in Mexico, 40% in Chile, and 41% in Argentina, excluding foreign currency fluctuations.
Free cash flow exploded higher despite the hit to GAAP profits -- $1.8 billion in Q1 2026, versus just $759 million in Q1 2025.
Investors are clearly spooked by the falling GAAP profits, but from a free cash flow perspective, Mercadolibre still looks healthy. The company has generated $11.8 billion in positive FCF over the past 12 months -- nearly 10x reported net income under GAAP. "Thanks" to today's sell-off that has cut its market capitalization to $84 billion, that works out to just a 7.1x price-to-free cash flow ratio on the stock.
Now, if Mercadolibre can just figure out a way to grow the numbers investors care about, the stock would look ridiculously cheap at this price.
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Rich Smith has positions in MercadoLibre. The Motley Fool has positions in and recommends MercadoLibre. The Motley Fool has a disclosure policy.
Why Mercadolibre Stock Crashed Today was originally published by The Motley Fool