Nu Holdings Stock: Buy, Sell, or Hold?

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Nu Holdings (NYSE: NU) has taken its investors on a wild ride since its public debut in December 2021. The Latin American digital bank went public at $9 a share, sank below $4 in 2022, and soared back to about $15 as of this writing. Let's see if it's the right time to buy, sell, or hold this volatile fintech stock.

It's one of the world's fastest-growing banks

Nu only provides online banking services, which enables it to scale up its business at a much faster rate than its brick-and-mortar competitors. It's based in Brazil, and it also provides its banking services in Mexico and Colombia.

Two people checking a tablet computer.
Image source: Getty Images.

More than 70% of Latin America's population is still unbanked, according to the World Bank and Latin America Reports. But the World Bank also estimates that Latin America's internet penetration rate jumped from 46% in 2013 to 81% in 2023. That makes Latin America one of the world's most fertile regions for digital banking services.

Nu established an early mover's advantage in that market, and it more than tripled its customers from 33.3 million at the end of 2021 to 104.5 million by the end of the second quarter of 2024. During that period, Nu's activity rate (its active customers divided by total customers) grew as it rolled out more services. Its monthly average revenue per active customer (ARPAC) more than doubled, and the costs for serving those customers rose at a much slower rate. Its adjusted net profit turned positive in 2021 and soared at a compound annual growth rate (CAGR) of 1,246% over the following two years.

Metric

2021

2022

2023

Q1 2024

Q2 2024

Customer Growth (YOY)

62%

38%

26%

26%

25%

Activity Rate

76%

82%

83%

83%

83%

Monthly ARPAC

$4.50

$8.10

$9.60

$11.40

$11.20

Monthly Average Cost to Serve per Active Customer

$0.80

$0.80

$0.80

$0.90

$0.90

Total Revenue Growth (YOY)

130%

182%

68%

69%

52%

Data source: Nu Holdings. YOY = Year-over-year.

The reasons to buy and hold Nu's stock

Nu's business is maturing, but it could still have plenty of upside potential as it gains more customers and expands into more countries. Its credit cards and crypto trading tools should further increase the stickiness of its ecosystem.

For 2024, analysts expect Nu's revenue and adjusted earnings per share (EPS) to increase 40% and 68%, respectively. For 2025, they expect its revenue and adjusted EPS to rise 28% and 48%, respectively. Those are stunning growth rates for a stock that trades at just 25 times forward earnings. That's probably why Warren Buffett's Berkshire Hathaway (NYSE: BRK.A) (NYSE: BRK.B) invested in its IPO and still holds a $1.6 billion stake in the company.