Amazon (AMZN), MercadoLibre (MELI), and Alibaba (BABA) are all well-known companies with vital roles in the global economy. However, each offers a distinct investment profile. Based on the results of my analysis, I am neutral on Amazon, bullish on MercadoLibre, and neutral on Alibaba.
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Amazon Offers Stability Despite Being Overvalued
I’m neutral on Amazon, which has established itself as the world’s largest e-commerce company. In addition, the company’s diversification into Amazon Web Services, also known as AWS, gives it a robust growth horizon. However, its valuation is arguably significantly extended.
The company has a three-year annual revenue growth rate of 13.1%. However, this appears to be somewhat unsustainable, with consensus estimates suggesting approximately a 10.9% annual revenue growth rate over the next three years.
My independent valuation model shows that Amazon is likely to achieve at least a conservative 9.5% revenue CAGR from Fiscal 2024–2034. This will primarily be supported by robust growth in AWS. Therefore, I estimate a Fiscal 2034 total revenue of $1.57 trillion for Amazon. As operational efficiencies and AI-driven automation are likely to drive the company’s margins higher, I anticipate an EBITDA of $353.25 billion for Fiscal 2034.
Amazon’s EV-to-EBITDA ratio has been in a long-term downtrend due to expanding profitability and lower growth rates. The current forward ratio is nearly 16, and to be conservative, I am using a terminal EV-to-EBITDA multiple of 13.5. This leads me to a Fiscal 2034 enterprise value estimate of $4.77 trillion, which implies a 7.2% CAGR from December 2024’s enterprise value of $2.39 trillion until December 2034.
Based on this analysis, Amazon does offer good growth prospects and relative stability, but its valuation appears somewhat extended to me. As a result, my rating for Amazon stock is currently a Hold.
What Does Wall Street Rate Amazon?
On Wall Street, Amazon has a consensus Strong Buy rating, with a 4.52% upside projected over the next 12 months, based on 45 Buy and one Hold ratings in the past three months. The average AMZN price target is $239.75. While this outlook is bullish, the 4.52% implied upside falls well below my 15% annual return threshold for investment. Furthermore, the company appears significantly overvalued to me.
MercadoLibre Offers High Growth from Latin America
I’m bullish on MercadoLibre, which has the highest growth rates of the three companies. It dominates the Latin American market with both an e-commerce platform and a fintech arm, Mercado Pago. I’m often more excited about smaller companies like MercadoLibre because of the higher growth and better valuations they offer.
MercadoLibre has a 54.76% three-year annual revenue growth rate, although this level of growth is certainly unsustainable. Consensus estimates for the next three years indicate approximately a 19.4% annual revenue growth rate.
To be conservative, I forecast a 15% annual revenue growth rate for the company over the next 10 years. This leads me to a Fiscal 2034 revenue estimate of $83.58 billion. MercadoLibre’s EBITDA margin has not been particularly stable, but I do expect some expansion over the next decade related to AI integrations. At an EBITDA margin of 17.5%, the company would have a Fiscal 2034 EBITDA of $14.63 billion.
The business has been scaling its EBITDA substantially recently, so it is challenging to gauge a suitable EV-to-EBITDA ratio for it. However, a ratio of approximately 20 is reasonable to forecast, given typical multiples seen in e-commerce. While 20 is still high, it seems fair to me given the high-growth nature of the business and the potential for future profitability expansion. Therefore, my Fiscal 2034 enterprise value estimate for MercadoLibre is $292.6 billion.
As MercadoLibre currently has an enterprise value of $103.81 billion, the implied enterprise value CAGR from December 2024 to December 2034 is 10.9%. This is a strong 10-year CAGR, so my rating for the stock is a Buy. It is also worth recognizing that its returns will likely be stronger in the next few years due to higher growth rates from lower market maturity.
What Does Wall Street Rate MercadoLibre?
On Wall Street, MercadoLibre has a Strong Buy consensus rating, with a 27.29% upside potential projected over the next 12 months, based on 11 Buy and one Hold ratings. The average MELI price target is $2,360. This highlights the strong near-term return prospects the company offers and strongly reaffirms my independent Buy rating.
Alibaba Is Undervalued with Moderate Growth
I’m neutral on Alibaba, a dominant e-commerce player in China that is also expanding its international presence through platforms like AliExpress. Moreover, the business is maintaining robust revenue growth from its AI products, which are showing triple-digit growth. However, the business is not growing very fast, which has contributed to its present undervaluation.
Alibaba has a three-year annual revenue growth rate of 8.6%. Based on consensus estimates, this is likely to expand moderately over the next three years, with an annual revenue growth rate of 7.2%.
I conservatively forecast that the company will achieve a 5% annual revenue growth rate over the next 10 years. Therefore, my estimate for Alibaba’s December 2034 trailing 12-month revenue is $223.29 billion. The company has an unstable and recently contracting EBITDA margin, so even though AI and automation will likely improve this, I am forecasting a conservative 20% EBITDA margin for December 2034. Therefore, my estimate for Alibaba’s December 2034 EBITDA is $44.66 billion.
Of the three investments, Alibaba is potentially the only one that is undervalued. Its forward EV-to-EBITDA ratio of 6.83 represents a -46.35% contraction from its five-year average. To be conservative, I will use the midpoint of its five-year average and current EV-to-EBITDA ratios for my terminal multiple. At an EV-to-EBITDA ratio of 9.75 in December 2034, the company’s enterprise value would be $435.43 billion.
Alibaba’s current enterprise value is $183.84 billion, which indicates an enterprise value CAGR of 9% from December 2024 to December 2034. While this is quite robust, I do not expect returns to be significant in the near term unless the market rerates the company’s valuation, and 9% is well below my 15% minimum threshold for the long term. Therefore, my rating for Alibaba stock is a Hold.
What Does Wall Street Rate Alibaba?
On Wall Street, Alibaba has a Strong Buy rating, which I believe is primarily due to its valuation. The average BABA price target is $127.05, indicating a 35.59% upside over the next 12 months, based on 14 Buy and one Hold ratings. While this outlook appears promising, I’m personally not convinced that such a significant value rating is justified given its lower growth compared to peers like Amazon and MercadoLibre.
Conclusion: MercadoLibre Is Currently the Best Investment
For stability, high growth, and reliability, I currently favor MercadoLibre over both Amazon and Alibaba. While all three companies are robust and integral linchpins in the global economy, MercadoLibre is uniquely positioned in the high-growth Latin American market at a relatively early stage, offering investors the opportunity to capture substantial and stable medium-term returns.
