Latest news with #NuHoldings
Yahoo
19 hours ago
- Business
- Yahoo
Warren Buffett Just Sold 1 Stock Up 196% Over the Past 3 Years and Piled Into Another Stock Down 25%. What Is He Thinking?
Berkshire Hathaway continues to build up an enormous cash position. Nu has massive opportunities, but there's risk in Latin America right now. By contrast, Constellation Brands offers stability in a volatile market. 10 stocks we like better than Constellation Brands › Warren Buffett and his team at Berkshire Hathaway continued their streak of selling more stocks than they bought in the 2025 first quarter, building up the company's cash pile to more than $347 billion. They sold eight stocks, including closing two positions. One of those was the struggling Citibank and the other was Nu Holdings (NYSE: NU), a soaring growth stock that's up 196% over the past three years. However, they still found seven stocks worthy of buying in the quarter, although they didn't start any new positions. Of particular interest was ramping up their position in Constellation Brands (NYSE: STZ), which is down 25% over the past three years. This could look like a value trap to the amateur investor, but Buffett clearly sees it as a buying opportunity. Let's see why Buffett might be thinking that it's time to sell Nu, a high-growth stock, and buy Constellation Brands, which is down in the dumps. Buffett is the classic contrarian investor, meaning he goes against what the rest of the market is doing. But he employs the classic investing method of buying low and selling high. He has explained many times over the years that it doesn't make much sense to buy stocks at highs or sell them at lows. He looks to buy when everyone else is selling, and prices are down, and he aims to sell when the market is enthusiastic, and prices are high. His most famous quote about this encapsulates this idea: "We simply attempt to be fearful when others are greedy and to be greedy only when others are fearful." Berkshire Hathaway invested in Nu, a digital bank, in a funding round just before its initial public offering in 2021, and it's done very well with this investment. However, it's not the holding company's typical stock pick. Buffett doesn't usually invest in young growth stocks, and he's not a big fan of technology. Nu still has massive growth opportunities. It's proven extremely popular in its headquarters of Brazil, where it already has 59% of the population as members and continues to grow at a high rate, and it's just getting started in Mexico and Colombia. It's highly profitable and consistently reports strong growth. What might be motivating Buffett to sell right now is the risk. Brazil has a high inflation rate, and Nu is feeling that right now it has increased provisions for losses and higher interest expenses. That, along with building out its business in Mexico and Colombia, is putting pressure on its margins. Being a proponent of the buy low, sell high philosophy, which underpins most successful investing, Buffett and his team might see this as an opportune time to move on to stable stocks that are more in line with their value approach to investing. Considering the deeper investment in Constellation Brands, as well as the other stocks Berkshire Hathaway extended its position in, there might be other factors at play, too. Buffett doesn't usually explain why he buys or sells stocks, and on rare occasions, he'll praise what he likes about a particular stock. But he freely gives advice about general investing, and that can give some clues about his own trades. He often talks about well-established businesses and strong brand names, and the investment in Constellation Brands, as well as the pullback from Nu, make sense if you understand what Buffett prizes. Constellation Brands makes alcoholic drinks under well-known labels like Corona beer and Casa Noble tequila. These are products that are always in demand, and the established brand names create a competitive advantage. Constellation Brands has reported lackluster growth over the past few years, but Buffett has his eye on the long term. He might also be considering the current uncertain economy and volatile market. It's more important in these times to hold onto secure stocks that can weather stormy seas. It also pays a growing dividend that yields 2.2% at the current price. Buffett loves dividends because they imply financial strength, stability, and a commitment to shareholders. On top of that, Constellation Brands stock looks cheap at today's price. It trades at a forward, 1-year P/E ratio of 13 and a price-to-cash flow ratio of 17, which is an attractive valuation. Constellation Brands stock likely won't appeal to the growth investor, but there would be long-term upside at the current price, and it offers the stability that features in most of Buffett's stocks. Before you buy stock in Constellation Brands, consider this: The Motley Fool Stock Advisor analyst team just identified what they believe are the for investors to buy now… and Constellation Brands wasn't one of them. The 10 stocks that made the cut could produce monster returns in the coming years. Consider when Netflix made this list on December 17, 2004... if you invested $1,000 at the time of our recommendation, you'd have $651,049!* Or when Nvidia made this list on April 15, 2005... if you invested $1,000 at the time of our recommendation, you'd have $828,224!* Now, it's worth noting Stock Advisor's total average return is 979% — a market-crushing outperformance compared to 171% for the S&P 500. Don't miss out on the latest top 10 list, available when you join . See the 10 stocks » *Stock Advisor returns as of May 19, 2025 Citigroup is an advertising partner of Motley Fool Money. Jennifer Saibil has positions in Nu Holdings. The Motley Fool has positions in and recommends Berkshire Hathaway. The Motley Fool recommends Constellation Brands and Nu Holdings. The Motley Fool has a disclosure policy. Warren Buffett Just Sold 1 Stock Up 196% Over the Past 3 Years and Piled Into Another Stock Down 25%. What Is He Thinking? was originally published by The Motley Fool Error in retrieving data Sign in to access your portfolio Error in retrieving data Error in retrieving data Error in retrieving data Error in retrieving data
Yahoo
3 days ago
- Business
- Yahoo
Nu's Digital Revolution: Growth, Value, and a Global Vision
Nu Holdings (NU, Financial) is considered one of the best growth stories coming from emerging markets. Thanks to its fast-growing revenues and earnings, a stable financial position, and a relatively low valuation, Nu has both size, speed, and room to grow. The company is gaining ground quickly, working flawlessly, and perhaps most importantly, doing it profitably. While the broader market was paying attention to a small EPS miss, Nu continued to deliver record revenues, increased customer involvement, and grew with unmatched efficiency in Latin America. When you consider Nu's banking move in Mexico, product diversification, and the growing interest from investors such as Cathie Wood and Baillie Gifford (Trades, Portfolio) (Trades, Portfolio) , it is easy to see that Nu Holdings is just getting started. Warning! GuruFocus has detected 6 Warning Sign with DASH. For investors looking for a high-growth company that is also affordable and has huge potential in the long run, Nu Holdings should be on their watchlist. Nu Holdings, known as Nubank, has transformed banking in Latin America by focusing on a digital-first, customer-obsessed approach. The company started in 2013 in Sao Paulo, Brazil, and now has grown into one of the world's largest digital banking platforms and caters to more than 114 million people across Brazil, Mexico, and Colombia. Nubank is partnering with innovative companies to offer a wide range of services to its customers. Above all, Nu works hard to provide affordable and accessible financial services to many people who have not had access before. Nu Holdings had a fantastic quarter; the market just didn't see it that way: Nu Holdings turned in a strong first quarter, demonstrating that, along with being a fast-growing digital bank, it is succeeding in growing profitably in Latin America. However, the market was not impressed. Shares fell 6.1% during after-hours trading as the company's GAAP earnings-per-share (EPS) was just $0.11 versus the $0.12 that analysts were expecting. The smaller-than-expected earnings, though flat since the last quarter and higher than a year back, triggered a sell-off that feels more like an automatic knee-jerk response than a reflection of the actual results. Customer growth driving the flywheel: Nu's success is mainly built on the strong growth it sees in customers, and this trend continues to impress. In Q1, the company gained 4.3 million new customers and now serves 118.6 million in total, which is up by 19% from the previous year. Brazil still remains the main focus, as Nu now serves 59% of Brazilian adults. Mexico and Colombia are also growing fast, adding 11 million and almost 3 million customers, respectively. Also, 83% of users are active, which reveals that these are not just temporary members; they regularly use the app and contribute to growing the monetization strategy. Financial muscle on full display: While EPS was a penny short, the rest of the company's financials are promising. Net income went up by 74% year-over-year (FX-neutral) to $557.2 million, and adjusted net income was $606.5 million. The company's revenues reached a new high of $3.2 billion, an increase of 40% FX-neutral. The company's efficiency ratio was 24.7%, which increased to 26.7% after taking out the one-time tax item, demonstrating that its operational efficiency wasn't dull either. Nu's scalability and disciplined cost control were reflected in a rise to $11.2 in ARPAC and the company's ability to limit the cost to serve per customer under $1. Although the risk-adjusted NIM went down to 8.2% due to credit costs and new operations, Brazil's main profitability did not weaken. A deposit engine that keeps getting stronger: Nu's deposits increased by 48%, reaching $31.6 billion, giving the company strong and low-cost funds. With a ratio of 44% loans to deposits, the bank can still safely increase its credit. Because of more borrowing and better credit mix choices, interest-earning assets rose by 62% YOY. The bottom line: Although Nu Holding's earnings fell short by a little, the stock still took a dip, but there is more to it. This quarter saw the company grow, improve its margins, and handle risks carefully. The fundamentals are not just there, but they are improving as well. All in all, the market's behavior seems to be a good buying opportunity rather than a matter of worry. Apart from its strong growth and profit, Nu Holdings has a very secure balance sheet. Thanks to a cash-to-debt ratio of a whopping 39.47 and having almost $14 billion in cash, this company is swimming in cash. As a result, NU's cash balance is around 40 times greater than its debt. Having so much cash is impressive, given that the company is still rapidly growing. With this much money, Nu is able to introduce itself to new markets, try new ideas, or handle challenges in business without hesitation. For investors, it is rare to see a business that aims high and has the resources to do so. The unique thing about Nubank is how it differs from ordinary banks, and that difference is intentional. The company does not have any physical branches. You can use the app for all your needs. Although this may seem basic today, it helps Nubank to massively improve margins by cutting infrastructure costs and soar ahead of traditional banks that pay for real estate. Next, we have crypto. While banks have yet to discuss crypto in detail, Nu Holdings has already launched Nubank crypto, making it possible for people to trade Bitcoin and Ethereum directly within the app. It is another way the business remains up-to-date and connected to its tech-savvy users. And let's not overlook the importance of the brand. Many people not only use Nubank, but also love it. It was placed at the top among all Brazilian companies, regardless of whether they were financial or not. It's not usual to see this level of trust and emotion in banking. All of this happens due to the culture, which feels more like a tech startup than a bank. Quick to act, product-focused, and customer-obsessed. As the financial industry moves slowly, Nu Holding's quick actions are highly beneficial. Nu Holdings is currently following a "Three Act Strategy" to make the largest and most loved retail bank in Latin America, offer services outside of finance, and build a global AI-based digital banking model. Under this strategy, the company has launched NuTravel, a service for planning trips within the app, and NuCel, its mobile virtual network operator (MVNO) service. They are intended to make Nu's offerings more varied and attract more customers. ? Adding to that, Nu Mexico made history in April when it was officially granted permission to become a bank. Consequently, this is Mexico's first SOFIPO to receive approval from the regulators and open doors for the company to expand its product lineup. The accounts have things like payroll services, higher deposit limits, and unlimited deposit insurance. While the change is being made, customers will continue to enjoy the same smooth experience online. Nu is expanding in Mexico, where it has over 10 million users and $1.4 billion invested, to help more people access financial services, as just five banks serve most of the population here. This action could really improve the current situation. In addition to thinking about how to expand globally, Nu Holdings is planning to relocate its legal domicile to the UK, which may also mean entering the United States as part of its strategy. The purpose of this move is to analyze different locations to find out if they are advantageous for the company, with a view to expanding internationally. ? Growth is not slowing down for Nu Holdings. Since the company has seen its revenue rise from $2.97 billion in 2022 to almost $8.27 billion by 2024, its growth in fintech for Latin America seems to accelerate even more in the next few years. Revenue is expected to grow at a rapid pace and reach $14.7 billion in 2025, $18.43 billion in 2026, and an even bigger $26.32 billion by 2027. Nu's model clearly shows its strength and the significant potential in the markets where it already operates. What's even more impressive is how quickly Nu is growing. The forward price-to-sales ratio is projected to fall from 4.30 in 2025 to just 2.40 by 2027. If this expectation is met, investors may see an increase in the amount of revenue they get for every dollar invested. Source: Consensus Revenue Estimates (Seeking Alpha) The earnings part is even better. Nu's EPS is expected to increase from $0.51 in 2025 to $0.99 by 2027, meaning it will almost double during those two years. EPS growth rates are accelerating year-over-year too, as analysts project a 24.91% rise in 2025, nearly 43% increase in 2026, and another 37% uptick in 2027. This positive trend is also seen in the company's expected forward PE ratio, which goes from 25.85 times in 2025 to 13.21 times by 2027. If things continue this way for Nu, the combination of strong earnings growth and valuation compression may lead to a powerful setup for long-term shareholders. Source: Consensus EPS Estimates (Seeking Alpha) The valuation of Nu at the moment is quite attractive. From the GF Value chart, $13.07 is the current stock price, while its intrinsic value is reported at $17.64. Therefore, it is said to be modestly undervalued, with an upside potential of roughly 35% if the company's progress continues. According to the chart, there is a clear upward trend through 2027, and prices are expected to rise steadily in all situations, even when the scenarios are kept conservative. The colored bands tell us about different outcomes, and even the worst-case scenario, where the price drops 30%, appears to suggest upside from the current point. Furthermore, its PEG ratio is 0.43 times, which is 38.4% lower than the sector median of 0.70, meaning the stock is growing quickly while being priced reasonably for its growth, which makes it even more attractive for long-term investors. Even though the P/E ratio of 29 times is much higher than the average, I still believe that NU is undervalued due to its impressive current and expected growth in revenue and EPS. NU's net income trailing twelve months (TTM) is already quite high, but owner earnings are where you see how much cash can be returned to its shareholders. The figure comes from taking our depreciation and amortization (D&A) total of $80 million and subtracting our estimated maintenance capital expenses. As most of Nu's spending is aimed at growing the business, we think around $69 million or 30% of its $231 million in capital expenditures is used for maintenance. As a result, we estimate that owner earnings are $2.16 billion. Since capital expenditures are just 3% of total revenue, Nu uses a model that allows most profits to be turned into free cash. It reveals how an online bank can operate more quickly and easily than a traditional bank with physical branches. Source: Author generated based on data and calculations Compared to its peers, Truist Financial (TFC, Financial) and PNC Financial Services Group (PNC, Financial), Nu is definitely unique and stands out. While TFC shares are currently trading for $41.09, the GF Value puts them at $29.88, meaning the stock is actually significantly overvalued right now. Meanwhile, PNC shares are trading at $179.44, which is quite close to the GF Value of $167.06, making it a fairly valued stock. To conclude, PNC is safe and reasonably valued, and TFC is expensive, but Nu combines impressive growth with low costs, making it rare in today's market. Source: Author generated based on historical data Based on the rapid growth expected for Nu Holdings and its current valuation, there are many reasons to be optimistic about the stock. The stock has increased by 23.24% this year so far, and at its current price of $13, it appears to be undervalued. Additionally, the PEG ratio shows that Nu is offering faster growth than most other companies at a lower cost. With all things considered, I believe a fair price target for Nu in a year is expected to be around $16 to $17, which represents a healthy upside while allowing for strong growth both this year and in the years to come if the company maintains its performance. Adding to the bullish case, most analysts are greatly optimistic about Nu's future prospects. Based on recent data, 17 analysts' targets indicate the stock could climb by 6.10% to $13.91 in the next 12 months and reach a maximum anticipated target of $18.9. All in all, Nu Holdings seems prepared for investors seeking future growth despite having a still-reasonable valuation. Nu Holdings has succeeded in offering profitable growth with a low valuation. This is probably the reason why Cathie Wood has taken notice of the company. Cathie didn't stop with Q4; she actually bought more of Nu's stock and increased her positions across different ARK funds. She's not alone either. Baillie Gifford (Trades, Portfolio) (Trades, Portfolio) , who is a long-term growth investor, also upped his stake and now holds over 17% more. In addition, Lee Ainslie (Trades, Portfolio) (Trades, Portfolio) nearly tripled his holdings by increasing them by almost 36%. Even after decreasing his holdings by 30%, Philippe Laffont (Trades, Portfolio) (Trades, Portfolio) holds over 55 million shares of Nu, which is the largest amount he holds in any company. Another way to put it is that it's a sign of being smart and strategic, not a sign of giving up. It is important to note that Warren Buffett (Trades, Portfolio) (Trades, Portfolio) 's Berkshire Hathaway bought shares in Nu Holdings when it went public in 2021, at about $9 per share. But recently in Q1, Buffett sold his shares in the stock. The reason could be that Nu relies on digital banking in Latin America, where the markets are experiencing economic volatility. That said, it's not necessarily about Nu's performance. In fact, Nu is still experiencing strong gains in both customers and earnings, despite the challenges Latin America is facing. While guru sells also exist, if a few of the best investors in the business are buying the same stock, it deserves attention. Growth, value, and confidence from major investors all fit together when it comes to Nu. Even though Nu Holdings is doing well, there are still some issues investors should be aware of. To begin, Nu's strategy for growth counts on everything being executed at the highest level. As the company expands into new areas such as crypto, mobile, and travel, it could lead to a shortage of resources. It is important to diversify, but focusing on too many things at once can cause problems and increase the risk of failure. Second, concerns about currency and inflation are a true challenge for Latin America. The main market for Nu, Brazil, is seeing an increase in inflation (around 5%) and a drop in the value of the real against the U.S. dollar. How the USD fluctuates against other currencies can reduce earnings, even if a company's business does well. We have seen a similar situation happen before, when Nu left Argentina because of high inflation and a volatile currency. Third, Nu should pay close attention to regulatory hurdles, as it is now transitioning to full banking status in Mexico. Regulatory approval can take a long time, and the outcome is hardly ever certain. Lastly, as Nu continues to accelerate its growth, being able to assess credit quality becomes very important. New market lending can cause more people to miss their loan payments, especially if the economy slows down. Nu Holdings checks a lot of boxes for long-term investors. It is growing quickly, has solid profitability, is well-managed, and clearly has potential for further upside. Yes, the recent EPS miss caused some worry in the market, but it's just a temporary disturbance. On a closer look, fundamentals are quite interesting as Nu is scaling rapidly, innovating with purpose, and gaining the support of both customers and top investors. Its cash-rich balance sheet, rising profit margins, and big opportunities in Latin America (and beyond) give it an edge in fintech. Like any other emerging market player, Nu faces risks, though it has shown it can handle them with agility. And with shares lower than their intrinsic value, investors have an opportunity to get in early before this company develops into a major financial institution of the digital age. This article first appeared on GuruFocus.
Yahoo
7 days ago
- Business
- Yahoo
This Week In Digital Payment - Innovation and Competition Transform Financial Services Landscape
The "Beyond Banking for Consumers: The Next Frontier" report highlights a shift in the digital payment and banking sectors, driven by both financial and non-financial disruptors. It explores how global financial institutions are moving beyond traditional offerings to provide a more holistic suite of services, including financial wellness and lifestyle benefits. Key players like PayPal and Nubank are leading innovations, while Big Tech is entering the space with ambitions to create superapps. As the industry faces challenges such as narrowing interest margins, incumbent banks are pressured to innovate and offer beyond banking solutions to maintain competitiveness. last closed at $11.99 down 2.1%. last closed at $69.85 down 2.2%. In other trading, was a standout up 2.5% and closing at ₹140.18. In the meantime, softened, down 3.8% to finish the session at SAR26.25, hovering around its 52-week low. Nu Holdings is rapidly expanding into secured lending and new markets, highlighting significant potential for increased revenue growth. Discover the full narrative on Nu Holdings to explore their ambitious strategy further. ended the day unchanged at, $260.71. settled at $13.09 down 0.8%. ended the day at $353.54 down 1.2%, near its 52-week high. Click here to access our complete index of 197 Digital Payment Stocks, which features Sumitomo Mitsui Financial Group, Yuanta Financial Holding and Banco BPM. Interested In Other Possibilities? Explore 22 top quantum computing companies leading the revolution in next-gen technology and shaping the future with breakthroughs in quantum algorithms, superconducting qubits, and cutting-edge research. This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned. Sources: Simply Wall St "Beyond Banking for Consumers Analysis Report 2025: SMEs Lead Beyond Banking Initiatives, Retail Banks Urged to Innovate" from Research and Markets on GlobeNewswire (published 23 May 2025) Companies discussed in this article include NSEI:IRFC NYSE:JPM NasdaqGS:SOFI NYSE:V NYSE:NU NasdaqGS:PYPL and SASE:1150. This article was originally published by Simply Wall St. Have feedback on this article? Concerned about the content? with us directly. Alternatively, email editorial-team@
Yahoo
7 days ago
- Business
- Yahoo
This Week In Digital Payment - Innovation and Competition Transform Financial Services Landscape
The "Beyond Banking for Consumers: The Next Frontier" report highlights a shift in the digital payment and banking sectors, driven by both financial and non-financial disruptors. It explores how global financial institutions are moving beyond traditional offerings to provide a more holistic suite of services, including financial wellness and lifestyle benefits. Key players like PayPal and Nubank are leading innovations, while Big Tech is entering the space with ambitions to create superapps. As the industry faces challenges such as narrowing interest margins, incumbent banks are pressured to innovate and offer beyond banking solutions to maintain competitiveness. last closed at $11.99 down 2.1%. last closed at $69.85 down 2.2%. In other trading, was a standout up 2.5% and closing at ₹140.18. In the meantime, softened, down 3.8% to finish the session at SAR26.25, hovering around its 52-week low. Nu Holdings is rapidly expanding into secured lending and new markets, highlighting significant potential for increased revenue growth. Discover the full narrative on Nu Holdings to explore their ambitious strategy further. ended the day unchanged at, $260.71. settled at $13.09 down 0.8%. ended the day at $353.54 down 1.2%, near its 52-week high. Click here to access our complete index of 197 Digital Payment Stocks, which features Sumitomo Mitsui Financial Group, Yuanta Financial Holding and Banco BPM. Interested In Other Possibilities? Explore 22 top quantum computing companies leading the revolution in next-gen technology and shaping the future with breakthroughs in quantum algorithms, superconducting qubits, and cutting-edge research. This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned. Sources: Simply Wall St "Beyond Banking for Consumers Analysis Report 2025: SMEs Lead Beyond Banking Initiatives, Retail Banks Urged to Innovate" from Research and Markets on GlobeNewswire (published 23 May 2025) Companies discussed in this article include NSEI:IRFC NYSE:JPM NasdaqGS:SOFI NYSE:V NYSE:NU NasdaqGS:PYPL and SASE:1150. This article was originally published by Simply Wall St. Have feedback on this article? Concerned about the content? with us directly. Alternatively, email editorial-team@ Error in retrieving data Sign in to access your portfolio Error in retrieving data Error in retrieving data Error in retrieving data Error in retrieving data
Yahoo
23-05-2025
- Business
- Yahoo
NU Stock Declines 16% in Six Months: Should You Buy, Hold or Sell?
Nu Holdings Ltd. NU has faced pressure recently, with its stock sliding nearly 16% over the past six months, a sharp contrast to the industry's 23% growth. Image Source: Zacks Investment Research While NU's decline stands out, peer performance offers a mixed picture. SoFi Technologies SOFI has also faced headwinds, declining 19% during the same period, reflecting broader volatility in the Latin American financial sector. On the other hand, Banco Santander (Brasil) S.A. BSBR has delivered gains, surging more than 17%, driven by optimism around its expanding digital financial ecosystem. This divergence in performance across NU's competitors, particularly Banco Santander (Brasil) S.A. and SoFi, raises important questions about the company's near-term trajectory. With SoFi demonstrating resilience in the U.S. market and Banco Santander (Brasil) S.A. navigating regional challenges, investors may see the current dip in NU stock as a potential entry point. However, further analysis is needed to assess whether this pullback reflects temporary market sentiment or deeper structural concerns. As a trailblazer in the fintech industry, Nu Holdings leverages a digital-first and scalable business model to drive down operational costs while boosting efficiency. This innovative approach has positioned NU as a disruptor in traditional banking, enhancing financial inclusion and accessibility across its markets. NuBank, NU's flagship platform, has earned recognition as one of Latin America's most trusted and prominent brands. In Brazil, a market dominated by traditional banking giants, NU has carved out a distinct identity with its innovative cost structure and customer-centric model. Its customer base continues to grow at an impressive pace, propelled by its digital-first strategy. The company is also making substantial strides in expanding its operations across Latin America, particularly in Mexico and Colombia, where adoption is accelerating. With opportunities to penetrate untapped regions, NU's footprint is poised to expand further. During the first quarter of 2025, the company added 4.3 million customers, bringing its global customer count to 118.6 million. The increasing trend toward digitization is expected to sustain and enhance this growth trajectory. NU's revenue model is highly diversified, encompassing streams such as lending, interchange fees and marketplace services. This diversification not only mitigates risks but also provides stability during economic uncertainties. The company has consistently demonstrated robust revenue growth, driven by higher monetization of its platform and increased user engagement. Key areas like credit cards and personal loans have significantly contributed to its financial success. In the first quarter, NU reported a 19% year-over-year revenue increase. Return on equity (ROE), a measure of profitability, reflects how effectively a company uses its shareholders' investments to generate earnings. NU's trailing 12-month ROE is 30.8% compared with the industry's average of 11.7%. Image Source: Zacks Investment Research NU has also shown strong returns on invested capital (ROIC), with a trailing 12-month ROIC of 14.5%, well above the industry average of 3.1%. Image Source: Zacks Investment Research NU stock appears significantly overvalued compared to industry peers, currently trading at 17.77 times forward earnings, more than double the sector's average of 8.58 times. This substantial premium reflects the market's optimism about NU's growth potential, driven by its innovative fintech model, expanding customer base and strong revenue trajectory. However, such a lofty valuation also introduces risks, as any shortfall in earnings or slower-than-expected growth could lead to a sharp correction. Over the past 60 days, NU has seen lowered revisions in analyst estimates. Two analysts downgraded their projections for 2025 and one for 2026, suggesting growing concerns about mid-term growth or profitability. There have been no upward revisions for either year during this period, indicating a lack of renewed optimism. These downward revisions imply a cautious outlook, with more analysts losing confidence than gaining it. Brazil is currently grappling with an inflation rate of around 5%, notably higher than that of the United States, while its currency has steadily weakened against the U.S. dollar since early 2024. Although Brazil isn't experiencing hyperinflation, the persistent above-average inflation remains a key concern. More broadly, inflationary volatility is a recurring theme in several Latin American markets where NU Holdings operates. Even relatively developed economies like Argentina have faced severe inflation, prompting Nubank to make a swift exit from that market due to economic instability. These macroeconomic headwinds, including potential foreign exchange losses, pose a real risk to Nubank's profitability and could weigh on investor sentiment moving forward. Despite NU's strong growth and profitability metrics, the stock's 16% decline over the past six months, amid industry gains, raises red flags. The company faces macroeconomic headwinds, including rising inflation and currency depreciation in key Latin American markets. Recent downward analyst revisions for 2025 and 2026 suggest growing skepticism about NU's mid-term performance. Moreover, NU trades at a steep premium compared to peers, making it vulnerable to further corrections if growth slows. With heightened valuation risk, inflation concerns, and waning analyst confidence, now may be a prudent time for investors to sell NU stock and reassess reentry at a more favorable price. NU currently carries a Zacks Rank #4 (Sell). You can see the complete list of today's Zacks #1 Rank (Strong Buy) stocks here Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report Nu Holdings Ltd. (NU) : Free Stock Analysis Report Banco Santander Brasil SA (BSBR) : Free Stock Analysis Report SoFi Technologies, Inc. (SOFI) : Free Stock Analysis Report This article originally published on Zacks Investment Research ( Zacks Investment Research Sign in to access your portfolio
