Emerging markets (EM) have long been a hotspot for investors seeking high-growth opportunities, balancing both risk and reward. With these economies projected to contribute over 60% of global GDP growth, their potential remains undeniable, fueled by technological innovation, infrastructure expansion, and renewable energy investments.
As investors explore opportunities beyond developed markets, high-upside stocks like MercadoLibre, Inc. (MELI), Sea Limited (SE), and Centrais Elétricas Brasileiras S.A. - Eletrobrás (EBR) could be worth considering.
However, investing in emerging markets comes with its own set of challenges. With Trump 2.0 in full swing, concerns over U.S. trade policies, tariffs, and geopolitical tensions have introduced uncertainty for global markets, including EM stocks. China’s sluggish recovery and a stronger U.S. dollar have also contributed to their recent underperformance.
That said, history suggests emerging markets have delivered strong returns even under previous Trump-era policies, with annualized growth of 13.6% in his first term. Analysts remain optimistic, forecasting high-single-digit to low-teen returns for EM equities by 2025, supported by favorable macroeconomic trends and structural growth drivers. Moreover, S&P Global estimates that emerging markets will drive 65% of global economic growth over the next decade, outpacing advanced economies.
While the internet sector benefits from e-commerce growth and AI advancements, the utilities sector offers stability and long-term renewable energy prospects. Therefore, investors seeking a mix of defensive and high-growth opportunities might find MELI, SE, and EBR compelling.
Now, let’s examine the fundamental aspects of the above-mentioned stocks in detail:
MercadoLibre, Inc. (MELI)
Based in Montevideo, Uruguay, MELI operates online commerce platforms in the United States. It operates in two segments: Mercado Libre Marketplace and Mercado Pago FinTech platform. The company offers an automated online marketplace for buying and selling, as well as a financial technology platform for online transactions and payments.
In terms of the trailing-12-month EBIT margin, MELI’s 12.66% is 55.6% higher than the 8.14% industry average. Its 9.20% trailing-12-month net income margin is 118% higher than the 4.22% industry average. Further, the stock’s trailing-12-month ROCE of 51.50% compares to the industry average of 11.09%.
For the fourth quarter that ended December 31, 2024, MELI’s net revenues and financial income increased 37.4% year-over-year to $6.06 billion. Its gross profit rose 34.1% over the prior year’s quarter to $2.75 billion. The company’s net income and EPS increased to $639 million and $12.61 from the year-ago values of $165 million and $3.25 per share, respectively. Also, its adjusted EBITDA came in at $972 million, up 106.8% year-over-year.
Analysts expect MELI’s EPS for the first quarter (ending March 2025) to increase 20.6% year-over-year to $8.18, and its revenue for the same period is expected to grow 26.1% year-over-year to $5.47 billion. Moreover, the company topped the consensus revenue estimates in each of the trailing four quarters, which is promising.
The stock has gained 30.1% over the past year to close the last trading session at $2,260. Out of 11 analysts that rated MELI, 10 rated it Buy, while one rated it Hold. The 12-month median price target of $2,560 indicates a 13.3% upside potential from the last closing price.
MELI’s POWR Ratings reflect its promising prospects. The POWR Ratings are calculated by considering 118 different factors, each weighted to an optimal degree.
The stock has an A grade for Sentiment and a B for Quality. MELI is ranked #30 out of 49 stocks in the A-rated Internet industry. To access additional MELI ratings for Growth, Value, Momentum, and Stability, click here.
Sea Limited (SE)
Headquartered in Singapore, SE engages in the digital entertainment, e-commerce, and digital financial service businesses. The company offers the Garena digital entertainment platform, SeaMoney digital financial services, and Shopee e-commerce platform.
Last year, in September, SE announced a strategic alliance with Bangkok Bank PCL, BTS Group, Saha Group, and Thailand Post, four leading Thai companies, to apply for a Virtual Bank license in Thailand.
The alliance aims to leverage the companies’ strengths to deliver innovative digital financial services, particularly for underserved segments of the population. This move could bring in more users and consumers to SE’s financial platforms, facilitating its long-term growth.
SE’s trailing 12-month levered FCF margin of 11.08% is 29.6% higher than the 8.54% industry average. Similarly, its 0.78x trailing-12-month asset turnover ratio is 57.7% higher than the 0.49x industry average.
During the fiscal third quarter that ended September 30, 2024, SE’s revenue increased 30.8% year-over-year to $4.33 billion. Its operating income came in at $22.42 million versus an operating loss of $127.74 million in the prior-year quarter. The company’s net income and EPS amounted to $153.32 million and $0.24 compared to a year-ago loss of $143.98 million and $0.26 per share, respectively.
The consensus revenue estimate of $4.64 billion for the fourth quarter (ended December 2024) represents a 28.4% increase year-over-year. The consensus EPS estimate of $0.69 for the same period indicates a significant growth from the previous year. The company has an excellent surprise history, surpassing the consensus revenue estimates in each of the trailing four quarters.
Shares of SE have surged 188.7% over the past year and 20.3% year-to-date to close the last trading session at $127.62. Its 12-month price target of $137.67 reflects a 7.9% potential upside.
SE’s robust fundamentals are reflected in its POWR Ratings. The stock has an overall rating of B, translating to a Buy in our proprietary rating system.
SE has an A grade for Growth and a B for Quality. Within the A-rated Internet industry, it is ranked #19 out of 49 stocks. Click here to see the other SE ratings for Value, Momentum, Stability, and Sentiment.
Centrais Elétricas Brasileiras S.A. - Eletrobrás (EBR)
Based in Rio de Janeiro, Brazil, EBR and its subsidiaries engage in the generation, transmission, and distribution of electricity in Brazil. The company generates electricity through hydroelectric, thermal, nuclear, wind, and solar plants.
In terms of the trailing-12-month gross profit margin, EBR’s 46.76% is 2.9% higher than the 45.43% industry average. In addition, its trailing-12-month EBIT and net income margins of 44.23% and 27.09% are 102.3% and 113.7% higher than their respective industry averages of 21.86% and 12.68%.
EBR’s net operating revenue for the third quarter that ended September 30, 2024, increased 25.8% year-over-year to R$11.04 billion ($1.93 billion). Its gross revenue rose 22.3% year-over-year to R$12.96 billion ($2.26 billion). The company’s adjusted EBITDA improved 164.1% over the prior-year quarter to R$11.96 billion ($2.09 billion). Also, its adjusted net income increased to R$7.56 billion ($1.32 billion) from R$1.48 billion ($257.52 million) recorded in the same period last year.
Street expects EBR’s revenue for the fiscal 2025 first quarter (ending March 2025) to increase marginally year-over-year to $1.76 billion, and its EPS is expected to come in at $0.13. For the fiscal year 2025, its revenue and EPS are forecasted to reach $6.81 billion and $0.34, respectively.
Over the past month, the stock has gained 12.3% to close the last trading session at $6.59.
It’s no surprise that EBR has an overall rating of A, equating to a Strong Buy in our POWR Ratings system. It has a B grade for Growth, Value, Momentum, Sentiment, and Quality. Out of 50 stocks in the Utilities – Foreign industry, it is ranked #2.
Beyond what is stated above, we’ve also rated EBR for Stability. Get all EBR ratings here.
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MELI shares were trading at $2,225.00 per share on Monday afternoon, down $35.00 (-1.55%). Year-to-date, MELI has gained 30.85%, versus a 2.48% rise in the benchmark S&P 500 index during the same period.
About the Author: Shweta Kumari
Shweta's profound interest in financial research and quantitative analysis led her to pursue a career as an investment analyst. She uses her knowledge to help retail investors make educated investment decisions.
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