Shares of Nu Holdings (NYSE: NU) have skyrocketed to an 88% gain this year amid strong growth and accelerated profitability from Latin America’s largest digital bank. With the stock trading at a 52-week high, expectations are building into the company’s upcoming third-quarter earnings report (for the period ended Sep. 30), set to be released on Nov. 13.
Let’s discuss what to expect and whether Nu Holdings stock could be a good buy right now.
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Warren Buffett must have seen the potential in Nu Holdings when Berkshire Hathaway emerged as an investor around the time of the company’s initial public offering in 2021. At the time, the $1 billion investment stood out as an outlier within Berkshire’s equity portfolio, historically built around more mature companies from developed markets.
A lot has changed in the past three years, with Berkshire Hathaway’s current position in Nu stock valued at $1.7 billion, representing a 2.2% stake in the company. It’s fair to say Nu Holdings has positively surprised many people through its successful market strategy.
Nu Holdings is benefiting as customers increasingly use the platform as their primary banking account, while engaging more with the platform by adding new products over time.
Nu’s results this year have been highlighted by its continued ability to monetize its 105 million customers, a level that has climbed by 25% over the past year across countries like Brazil, Colombia, and Mexico.
In the last reported second quarter (for the period ended June 30), the average revenue per active customer (ARPAC) reached $11.20, up 30% on a foreign exchange (FX)-neutral basis from last year. The rapidly expanding level of customer deposits as a low cost of funding has supported a significant increase in lending activities. Solid credit metrics propelled Q2 revenue up 65%, while adjusted net income more than doubled from the period last year on an FX-neutral basis.
Overall, Nu Holdings is on a hot streak, and the market will want to see further momentum across these core indicators in the third quarter to reaffirm Nu’s earnings trajectory.
|
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.
