Two Strong Reasons to Purchase Nu Holdings Shares as if it's an Immediate Imperative
If you're fed up with sifting through leisurely increasing U.S. based fintech stocks, you might want to give Nu Holdings (NU -0.83%) a try. The company behind Brazil's Nubank, which has been making waves since its launch a decade ago and going public three years ago, is the brainchild behind this parent company.
There are some valid concerns regarding valuation and geopolitical elements, but are the risks worth the chance of a market-shaking return? Let's embark on a journey south, delving into two reasons why you might want to consider purchasing Nu as if there's no tomorrow.
1. Growth is always a trendy look
Nu has come a long way in a short span. It officially launched in Brazil in 2014, offering a credit card tailored to the country's vast unbanked population. Unbelievably, even the banked population has adopted it. A staggering 56% of Brazil's adult population now has a Nubank credit card, and its usage is skyrocketing. Monthly activity rate has reached a record 84% of its user base.
This isn't just a Brazilian growth story. Nu introduced its digital branchless bank in Mexico and Colombia a couple of years ago. Its customer base has expanded by 23% to 109.7 million over the past year. The business itself is growing even faster. Revenue soared 58% on a foreign-exchange basis or 38% in U.S. dollars for U.S. investors to $2.9 billion in its latest quarter. The bottom line is also growing rapidly. Adjusted earnings shot up 67% to $592 million in the third quarter it reported earlier this month.
Revenue growth is a given for a company in the early stages of disruption. However, the earnings story is more noteworthy. Nu turned profitable two years ago and has been expanding on that trend ever since. It's been able to boost its margins despite launching new products and investing in nascent markets. Nu is currently trading at 32 times this year's projected earnings and 22 times next year's target. This might seem like a steep multiple for financial services, but Nu's impressive growth and vast untapped potential make it an enticing proposition for cautious investors.
2. Opportunity is knocking after a recent dip
Nu hit an all-time high on Nov. 12. Two days later it shifted slightly after posting strong results. A day later it stumbled upon news that Warren Buffett's Berkshire Hathaway had offloaded a portion of its Nu position for the first time in over three years of ownership.
The shares have started to rebound, but they still enter this trading week 14% below this month's all-time high. The results were an impressive beat on both sides of the income statement. Buffett relinquishing 20% of his Nu position in a stock that has tripled since the beginning of the last year isn't shocking or alarming. The value of his Nu position is significantly higher than it was just a few months ago, despite the correction and the partial sale.
Nu has been a standout stock in the last two years, but growth stocks rarely move in a straight line. Sometimes, the bus takes a break before stepping on the gas again. This could be the dip you've been waiting for.
The runway is still long for Nu. It's not just about the 44% of Brazil that hasn't opened a Nubank account yet. It's about expanding beyond Mexico and Colombia. It's about leveraging its mainstream appeal to introduce new offerings. The Nu tale is barely two chapters old. Get comfortable, because the story is just getting started.
- Given Nu Holdings' impressive revenue growth and profitability, investing in this company could be a smart move for those interested in finance and seeking potential market-shaking returns, considering its low valuation compared to its earnings and growth potential.
- The recent dip in Nu Holdings' share price, despite its strong financial performance, presents a potential opportunity for investors who are looking to invest money in the company's long-term growth and expansion into new markets, such as Mexico and Colombia, and leveraging its products to capture untapped segments in Brazil.
