Owners of MELI, NU, SE etc: Are you really considering the downside?
u/Old_Man_Heats ·
Reddit — r/ValueInvesting
· June 19, 2026 at 23:40
· ⬆ 17 pts
· 💬 17 comments
| View on Reddit ↗
AI Summary
Summary
The post questions the sustainability of recent profitability and margin expansion at MELI, NU, and SE, attributing it to rapid loan book growth in volatile emerging markets.
The author warns that a recession or credit crunch could spike defaults regardless of real‑time data, forcing these companies to pull back lending and impair margins, leading to multiple contraction.
It’s a well‑reasoned cautionary analysis that challenges the “tech‑like PE” valuation by highlighting the embedded credit risk; not hard data but a thoughtful risk‑assessment.
Score17
Comments17
Upvote %88%
▶ Full Post Text
These are all fantastic businesses, but I can’t quite get past the fact that so much of their recent profitability and margin expansion is being driven by the massive scaling of their loan books.
They are operating in developing markets with historically volatile currencies and macro environments. My worry is that the only reason they appear cheap is because of the claim that due to the growth rates they should have tech like PEs but to achieve the growth rates and margin expansion they are taking on more and more risk.
I’ve heard the idea that legacy banks rely on outdated credit scores, whereas MELI and SE have real-time data on their merchants/consumers but is real-time data really enough to protect them in a credit crunch or global recession?
Even if they can see a merchant's sales dropping in real-time, if an emerging market economy enters a severe recession, defaults are going to spike regardless of how good the algorithm is. Because these loans are priced with high margins, they might not go bankrupt, but they would have to radically pull back and massively increase provisions for credit losses.
If credit growth stalls, the margin expansion vanishes, and the multiples on these stocks will violently contract.
For those holding these names:
Are you just accepting the risk because the current growth is so good?
What specific Non Performing Loan ratio or margin compression signal would force you to sell?
MELI’s margin expansion is heavily driven by its growing loan book in Latin America, a region with historically volatile currencies and macro environments. If a severe recession hits, defaults rise regardless of algorithmic credit scoring, forcing MELI to increase provisions and cut lending, which would compress margins and collapse the current growth‑justified multiple. Short MELI as a bet that credit risks are underpriced and that the market will re‑rate the stock lower when loan growth stalls or NPLs rise. Stronger‑than‑expected consumer credit performance; continued FX stability; MELI’s non‑financial segments (e‑commerce, logistics) offset credit losses.
NU’s profitability and margin expansion come from scaling its consumer lending in Brazil, a volatile EM with high interest rates and past default cycles. Similar to MELI, a macroeconomic shock would spike delinquencies, forcing NU to raise provisions and slow loan origination, puncturing the growth narrative and its premium valuation. Short NU on the thesis that the current cheap‑looking multiple is a trap built on unsustainable credit growth in a fragile economy. NU’s low cost structure and digital‑only model could maintain superior underwriting; rapid user growth buffers losses; Brazilian rates stay high (good for net interest margin).
This Reddit post, published June 19, 2026,
features u/Old_Man_Heats
discussing MELI, NU.
2 trade ideas extracted by AI with direction and confidence scoring.