Investing in Nu Holdings at prices under $15 – Worthwhile or Not?
In the dynamic world of digital banking, Nu Holdings, a Brazil-based powerhouse, continues to make waves across Latin America. With a market capitalization of $71 billion, the company is rapidly expanding its footprint beyond its home country.
Nu's recent strides in Mexico and Colombia have been noteworthy, but the company's growth story doesn't end there. In the second quarter of this year, Nu reported a significant improvement in its net income, marking a stark contrast from the $29.9 million net loss in the same period three years ago.
The past 24 months have seen Nu's shares jump by nearly 200%, and over the past three years, they have tripled in value. This impressive growth has caught the attention of Wall Street, with analyst estimates predicting a compound annual revenue growth rate of 30.7% between 2024 and 2027.
Nu's revenue climbed 40% year over year in the second quarter (ended June 30), a testament to its robust growth. The company operates in a region with increasing internet and smartphone penetration, creating a favorable backdrop for growth.
Latin America, with its large unbanked and underbanked population, presents a significant opportunity for Nu. As the economy grows, the company is well-positioned to serve this untapped market. In the last three months, Nu added 4.1 million net new customers, bringing its total to 122.7 million.
Nu's exceptional unit economics have contributed to the explosion of its bottom line. The cost to serve each customer in Q2 was $0.80, while the average revenue per active customer was $12.20 per month. This impressive profitability is a result of Nu's ability to leverage operational expenses.
In Q2, Nu generated a net income of $637 million, up 42% year over year. This strong performance has not gone unnoticed, with Nu's stock currently trading below $15, making it a potential buying opportunity.
Looking ahead, Nu's leadership team could potentially enter new markets in the future. Reports suggest that Nu is considering acquiring the Argentina-based Brubank to accelerate its regional expansion. Such a move would strengthen Nu's presence across Latin American countries beyond its current markets.
As of Aug. 27, Nu trades at $14.64 per share, reflecting the market's confidence in the company's growth prospects. With its strong financial performance, expanding customer base, and potential for further growth, Nu Holdings continues to shine in the digital banking landscape of Latin America.
