Hedgeye has advised clients to short MercadoLibre (MELI) while taking a long position in Sea Limited (SE). The firm projects a 42% total upside from this pair trade. Approximately 24% of the expected gain stems from a predicted decline in MercadoLibre’s share price.
Hedgeye’s bearish outlook centers on escalating competition in the e-commerce sector. TikTok Shop is increasing its investment in Brazil, a catalyst the firm believes investors are underestimating. MercadoLibre faces a two-front attack from both TikTok and Amazon.
Sea Limited’s Monee could emerge as a significant competitor to Mercado Pago. Hedgeye’s internal estimates for MercadoLibre remain materially below consensus Wall Street expectations. The firm warns that slowing revenue growth and margin pressure make MercadoLibre’s premium valuation vulnerable.