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Investors who want exposure to a high-growth industry might want to take a closer look at the intersection of financial services and technology. A company you might not have heard of within this sector is Nu Holdings (NYSE: NU), which has found tremendous success in overseas markets.
This fintech stock trades 25% off its peak price from November, which might worry some people. But is it a smart buying opportunity right now? Here are three reasons I think it is.
Growth
Nu should be on your radar because of the simple fact that its growth is so impressive. The company generated revenue of $2.9 billion in Q3, up 38% year over year. This number was more than 500% higher than the same period in 2021.
Nu's growth is definitely noteworthy. But it's important to highlight just how the business is gaining rapid adoption. This is a digital-only bank, offering various products like checking and savings accounts, credit cards, insurance, and brokerage services. By not operating physical branches, management is able to focus more on its technological foundation, which works to provide consumers with an exceptional user experience.
After adding 5.2 million net new customers in Q3, Nu has 109.7 million. The vast majority of these are in Brazil, the company's home market. Nu started targeting customers in Mexico and Colombia in recent years. Entering new countries in the future could definitely provide more growth opportunities.
Latin America offers lots of expansion potential. According to Latin America Reports, 70% of the population is unbanked or underbanked. As one of the largest digital banking platforms in the world, Nu is in an advantageous position to attract more customers in the region. This will lead to more revenue growth.
Profitability
With such a huge opportunity in front of it, it makes sense that Nu has historically prioritized growth above all else. However, this company is now much more financially sound than it was in 2022, when it posted a net loss of $9.1 million.
Nu has turned the corner. It finally reported positive net income according to generally accepted accounting principles (GAAP) in 2023. And during the third quarter last year, Nu's net income increased 83% year over year to $553 million, good for a hefty 18.8% margin. This is exactly what shareholders want to see because it indicates a sustainable business model.
Credit goes to strong unit economics. Nu generated $11 in average revenue per active customer in Q3. On a currency-neutral basis, that figure was up 25% year over year. That's definitely an encouraging trend.