Unlocking the Potential of Fintech Giant Nu Holdings
With a market capitalization of $53 billion and a spot in Berkshire Hathaway’s portfolio, Nu Holdings (NYSE: NU) is a fintech powerhouse that has flown under the radar of many American investors. Despite its impressive 213% growth over the past two years, the stock has taken a 30% hit since November. This dip presents an enticing opportunity for investors to get in on the action.
What Does Nu Holdings Do?
Nu provides a range of financial services, including bank accounts, credit cards, investment products, and insurance, all through a digital-only platform. Launched in Brazil in 2013, the company has expanded to Mexico and Colombia, with no physical branches in sight.
A Growth Story Unfolds
The company’s numbers are nothing short of remarkable. Revenue in Q3 2024 surged 38% year over year to $2.9 billion, a sixfold increase from the same period in 2021. The key driver of this growth is the rapid acquisition of new customers, with Nu boasting 110 million users today, up 23% from Q3 2023. Brazil remains the company’s stronghold, with 100 million customers, but Mexico is poised to become another major market.
Latin America’s Unbanked Opportunity
With 70% of the population in Latin America remaining unbanked or underbanked, Nu is well-positioned to capitalize on this massive opportunity. As smartphone and internet penetration rise, coupled with increasing incomes, the demand for Nu’s financial services is likely to grow.
Expanding Horizons
In December, Nu invested $150 million in Tyme Group, a digital banking start-up based in Singapore, which operates in Africa and Southeast Asia. This move provides Nu with a foothold in new growth markets.
Defying the Norm
Unlike many high-growth companies, Nu is not sacrificing profitability for expansion. In Q3 2024, the company reported a net income of $553 million, up 83% year over year, with a net profit margin of 18.8%. Operating a fully digital platform has allowed Nu to reap scale benefits, generating higher revenue per active customer while reducing costs.
A Compelling Investment Opportunity
With its stock trading at a forward P/E ratio of 17.9, a 73% discount to its trailing-three-year average, Nu presents a rare buying opportunity. For investors with a long-term horizon, Nu’s growth potential and improving profitability make it an attractive addition to their portfolio.
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