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Expectations tend to play an outsized role when it comes to quarterly earnings. And missed expectations are likely what affected Nu Holdings' (NYSE: NU) stock price after its Q4 release.
The financial technology (fintech) company operating as a neobank in Latin America posted strong Q4 revenue growth (again) but saw shares fall due to the high expectations Wall Street developed going into the report. As of this writing, share prices are down 32% from all-time highs set in mid-November 2024 and down 22% since the report's Feb. 20 release. That drop comes even though Nu is expanding rapidly in its home market of Brazil along with other large Latin American countries such as Mexico and Colombia (Nu Holdings now has over 114 million customers using its digital banking platform).
Given the missed expectations over the latest earnings report, some investors looking into the stock have to be asking: Is Nu Holdings stock a buy, sell, or hold right now? Let's take a closer look at the Latin American fintech giant to see if an answer presents itself.
More fast growth in Brazil
Nu Bank (its customer-facing name) has become a mainstay in Brazil. It has around 100 million customers in this market alone, or more than half the country's adult population. Despite its huge market share, its financials continue to compound at an aggressive pace. Deposits in the country now sit at $23.1 billion (calculated in U.S. dollars), growing 11% year over year.
As Nu Bank builds out its relationship with existing customers, it is able to offer more and more products for them. In turn, this leads to more revenue growth. Revenue in Brazil hit $9.5 billion in 2024 and has grown at a 79% annual rate since 2018. Customers can now invest, get personal loans, obtain insurance policies, and open credit cards through the Nu Bank platform. Nu Bank has become a key personal finance tool in Brazil and keeps growing its relationship with the population.
Through more scale, Nu Bank has been able to grow its earnings at a rapid pace. In 2022, Nu Holdings posted negative net income. In 2024, net income was just under $2 billion. As the business achieves more operating leverage (especially in new markets outside Brazil), we should see earnings grow even faster than overall revenue. Not a bad place to be as a business.
Emerging expansions into Mexico and Colombia
Likely due to Mexico and Colombia's large market size, Nu Bank decided to expand there first after establishing itself in Brazil. Argentina was most likely left off the list due to its hyperinflation concerns, even though it is a larger market. As of Q4 2024, Mexico surpassed 10 million customers, and Colombia passed 2.5 million customers. While much smaller than the Brazilian segment, these countries are growing quickly for Nu Bank and have a long runway to reinvest and acquire new digital customers.