Should Investors Consider Purchasing Nu Holdings' Shares at Present?
💼 Investors in search of a high-growth industry may want to dive deeper into the fusion of financial services and technology. One name worth exploring is Nu Holdings (NU), a relatively unknown player in this sector that's making waves in international markets.
Is this fintech stock a shrewd buy at the moment, with a 25% dip since November? I'd argue yes, and here are three compelling reasons why:
The Sea of Opportunities: Growth
Keep an eye on Nu due to its jaw-dropping growth statistics. In Q3, the company raked in $2.9 billion in revenue, marking a whopping 38% year-over-year increase. This figure grew an astonishing 500% compared to the same quarter in 2021!
Nu's success is no coincidence. This digital-only bank jumps out at customers by offering an array of products, including checking and savings accounts, credit cards, insurance, and brokerage services. By shunning physical branches, management can pour resources into its technological infrastructure, ensuring consumers enjoy a top-notch experience.
Post-Q3, Nu's clientele has swelled to 109.7 million. The majority of these newcomers hail from Brazil, the company's home base. In recent years, Nu has also set sights on Mexico and Colombia, which could pave the way for even more growth opportunities in untapped markets.
Latin America presents vast expansion prospects. According to Latin America Reports, an eye-popping 70% of the population remains unbanked or underbanked. Given Nu's status as one of the largest digital banking platforms globally, that's a considerable market share it can tap into, en route to more revenue surge.
Banking on Profitability
Despite its focus on growth, Nu has recently become financially healthier than in 2022, when it posted a net loss of $9.1 million. The world is currently witnessing Nu bouncing back. For the first time, it reported a positive net income based on generally accepted accounting principles (GAAP) in 2023.
This turnaround saw Nu's net income skyrocket 83% year-over-year to $553 million in Q3, translating to a sizeable 18.8% margin. Investors love to see sustainable business models, and Nu's current performance indicates just that.
Credit goes to Nu's robust unit economics. The company generated $11 in average revenue per active customer in Q3, a healthy 25% hike compared to the same term in 2023, on a currency-neutral basis. This trend is nothing short of encouraging.
On the flip side, Nu's operating costs per customer fell by 4% to $0.80 in Q3 compared to Q3 2023. It's clear that Nu is taking full advantage of operating leverage. Furthermore, operating expenses as a proportion of revenue diminished to 21%, a decline from 24% in Q3 2023.
Nu's Attractive Valuation
Nu's shares may be steeping at a few-months-ago peak, but this dip offers potential investors a promising buy-in chance.
With a forward price-to-earnings (P/E) ratio of 20.3, Nu's shares not only undercut their historical average but also represent a 10% discount relative to the broader S&P 500. These figures suggest that long-term investors might be in for some appealing returns in the future.
Analysts predict that Nu's revenue and earnings per share (EPS) will bolster at compound annual growth rates of 30% and 38%, respectively, between 2024 and 2026. Given the trajectory Nu is on, I believe these forecasts are reasonable. This would suggest that investors who jump onto the Nu bandwagon today could be preparing for fantastic returns in the years to come.
Given Nu Holdings' impressive financial performance, it's an attractive investment opportunity in the finance sector. In Q3, the company reported a 38% year-over-year revenue growth, with the majority of its expansion coming from its home market, Brazil. Furthermore, Nu reported its first-ever net income under GAAP in 2023, signaling financial health and a positive outlook for investors interested in money-making opportunities.
