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Macroeconomic challenges and industry-specific headwinds pushed top e-commerce stocks into heavily discounted territory in 2022. Amazon‘s (AMZN 2.14%) stock has fallen roughly 47% year to date and trades down 52% from its lifetime high. Meanwhile, Latin-American e-commerce leader MercadoLibre‘s (MELI -1.09%) share price has fallen 36% year to date and is down 52% from its peak level.

Both Amazon and MercadoLibre have strengths that potentially set the stage for market-crushing returns, but which of these category-leading online retail companies will go on to deliver better returns for investors? Read on to see why two Motley Fool contributors have differing takes on which stock is the better buy at today’s prices. 

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The case for Amazon 

Parkev Tatevosian: Amazon has had a challenging year in 2022, no doubt. The company overinvested in capacity due to the boom in business during the early stages of the pandemic. However, looking back longer, you can observe how skillfully Amazon has managed its expansion from a tiny online bookseller to an everything store. 

Between 2012 and 2021, Amazon’s revenue exploded from $61 billion to $470 billion. Meanwhile, its operating profit margin grew from 1.1% to 5.3%. Strong evidence of economies in scale like the aforementioned is highly desirable for long-term growth stock investors. That’s because as Amazon keeps growing its revenue, which analysts and investors widely expect, its operating profit margin could expand simultaneously.

Moreover, it will be difficult for competitors to encroach on Amazon’s e-commerce business meaningfully. Amazon has spent over $100 billion developing its logistics network to deliver goods to people’s homes faster than any other business. Even if a rival was to try, it could take years to build out a similar network. Amazon’s other vital business segment (Amazon Web Services) has a $104 billion backlog of customer contracts. In the most recent 12 months, AWS earned an operating profit margin of 30%.

AMZN PS Ratio Chart.

AMZN PS Ratio data by YCharts.

And fortunately for investors looking to buy Amazon stock today, the challenging year in 2022 has brought its valuation down considerably. Amazon’s stock is trading at a price-to-sales ratio of 1.9, which, if you ignore the brief moments it was lower this year, has not been that cheap since before 2016. 

The case for MercadoLibre

Keith Noonan: While Amazon leads the e-commerce market in North America and most other geographic territories, MercadoLibre stands as the market leader in Latin America. Amazon is undoubtedly the stronger overall company thanks to its scale and global leadership in online retail and cloud infrastructure services, but I also think there’s a good chance that MercadoLibre winds up being the better-performing stock over the next five years.

The e-commerce market has seen growth slow as it lapped periods of pandemic-elevated performance, and customers have gotten back to shopping at brick-and-mortar stores, but MercadoLibre has continued to post encouraging momentum. For example, total gross revenue for e-commerce in Brazil actually fell 23% year over year on Black Friday, according to data from NielsenIQ Ebit, but MercadoLibre’s online retail platform grew sales 10% compared to the prior-year period. This data suggests that the e-commerce business is continuing to gain market share, and the company’s Mercado Pago digital payments and banking platform is also gaining ground at an impressive clip. 

While Amazon is undeniably a great company, MercadoLibre is growing at a much faster pace. Better than 31% year-over-year growth for gross e-commerce merchandise volume and 76% growth for total payment volume on the fintech side of things helped push the Latin American company’s overall revenue to $2.7 billion in the third quarter — good for a 60.6% increase year over year. MercadoLibre also recorded a net income of $129 million on a roughly 4.8% margin in Q3, and its near-term earnings growth outlook isn’t as headwind heavy as Amazon’s.

With Amazon’s market cap sitting at roughly $903.5 billion and MercadoLibre’s value at approximately $44 billion, I think the smaller, faster-growing company has the potential to be a better performer for risk-tolerant investors. 

Which e-commerce stock is the better buy?

Deciding between Amazon and MercadoLibre stocks should come down to your personal appetite for risk and confidence in each company’s respective businesses. Amazon’s strong global positions in e-commerce, cloud services, and other categories make it the less risky of these two investment candidates, and the tech giant still has attractive avenues to delivering impressive long-term returns. On the other hand, MercadoLibre’s status as a smaller, faster-growing company potentially opens the door for more explosive returns, but its concentration in the Latin-American market creates risk factors that investors should take into consideration. 

John Mackey, CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. Keith Noonan has no position in any of the stocks mentioned. Parkev Tatevosian, CFA has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Amazon.com and MercadoLibre. The Motley Fool has a disclosure policy.