Nu Holdings Stock Soars: What Investors Need to Know Ahead of Q3 Earnings
Shares of Nu Holdings (NYSE: NU) have surged by an impressive 88% this year, fueled by robust growth and improving profits at Latin America’s leading digital bank. As the stock reaches a 52-week high, anticipation builds for the company’s third-quarter earnings report (covering the period ending September 30), scheduled for release on November 13.
A Stock Worth Watching: Insights from Warren Buffett
Berkshire Hathaway recognized the promise of Nu Holdings back in 2021 by making a $1 billion investment during the company’s initial public offering. This investment was notable within Berkshire’s portfolio, which typically features established companies from developed markets.
Fast forward to today, and Berkshire’s stake in Nu is now valued at $1.7 billion, accounting for 2.2% of the company. Nu Holdings has undeniably exceeded expectations with its strategic approach in the market.
Image source: Getty Images.
Continuing Growth Through 2025
Customers are turning to Nu Holdings as their main banking platform, and they are engaging more deeply by using additional products. The company has reported significant success in monetizing its growing customer base, which now stands at 105 million—a 25% increase in just one year across Brazil, Colombia, and Mexico.
In its last reported quarter (ending June 30), the average revenue per active customer (ARPAC) hit $11.20, reflecting a 30% increase on a foreign exchange (FX)-neutral basis compared to the previous year. Growth in customer deposits has provided a low-cost means of funding additional lending activities. As a result, Q2 revenue soared by 65%, and adjusted net income more than doubled from the previous year, also on an FX-neutral basis.
Overall, Nu Holdings is experiencing a strong growth phase, and the upcoming Q3 report is expected to reveal continued progress in these key areas.
| Nu Holdings metric | Q2 2023 | Q2 2024 | YOY change |
|---|---|---|---|
| Customers | 83.7 million | 104.9 million | +25% |
| FX neutral ARPAC | $8.60 | $11.20 | +30% |
| FX neutral revenue | $1,728 million | $2,849 million | +65% |
| FX neutral adjusted net income | $243 million | $563 million | +131% |
| FX neutral total lending portfolio | $12.7 billion | $18.9 billion | +49% |
Data source: Nu Holdings. YOY = year over year.
What to Anticipate From Q3 Earnings
Wall Street estimates predict that Nu Holdings will report Q3 revenue of $2.9 billion, a 39% increase from last year. Analysts expect earnings per share (EPS) to reach $0.11, a 57% rise compared to the previous year’s $0.07.
It is crucial for the company to at least meet these expectations. However, the management’s comments on current conditions and future outlook could significantly impact the stock’s performance following the Q3 report. Key insights regarding the loan portfolio, including delinquency rates and net interest margins, will be essential to demonstrate that the regional economy remains strong.
Nu Holdings is poised to benefit from a growing consumer base in Latin America that still lacks adequate banking penetration. This opportunity is seen as just the beginning of what could be decades of growth.
This promising outlook supports Nu Holdings’ relatively high valuation, with shares currently trading at 36 times its projected EPS. While this ratio is above that of peers like Block and PayPal, it remains lower than other banking disruptors like SoFi Technologies and Rocket Companies, which have multiples of 85 and 56, respectively.
A strong Q3 performance could demonstrate confidence among investors and lead to a stock rally, backed by historical precedents in the marketplace.
NU PE Ratio (Forward) data by YCharts
Long-Term Perspective for Investors
Investing in stocks before quarterly earnings can be risky due to unpredictable market reactions to potential disappointments. Despite these risks, I believe Nu Holdings remains a strong buy with growth potential extending into 2025 and beyond. Investors who concentrate on the long-term vision should find opportunities for gains in this vibrant industry.
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Dan Victor has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Berkshire Hathaway, Block, and PayPal. The Motley Fool recommends Nu Holdings and recommends the following options: long January 2027 $42.50 calls on PayPal and short December 2024 $70 calls on PayPal. The Motley Fool has a disclosure policy.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
