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Nu Holdings Ltd. NU has delivered impressive performance this year. Its stock has surged 41%, significantly outperforming the industry‘s growth of 10%.
However, the stock has faced a recent downturn, declining 21% over the past three months, indicating an ongoing correction. In comparison, its peers have shown varied results. Banco Santander (Brasil) S.A. BSBR dropped 27%, while SoFi Technologies SOFI soared with a remarkable 103% gain during the same period.
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This recent decline in NU shares raises the question of whether this could be a timely opportunity for investors to buy. Let’s explore the company’s outlook.
NU: Trailblazing Fintech Leader Redefines Banking Landscape
As a trailblazer in the fintech industry, Nu Holdings leverages a digital-first and scalable business model to drive down operational costs while boosting efficiency. This innovative approach has positioned NU as a disruptor in traditional banking, enhancing financial inclusion and accessibility across its markets. NuBank, NU’s flagship platform, has earned recognition as one of Latin America’s most trusted and prominent brands.
In Brazil, a market dominated by traditional banking giants, NU has carved out a distinct identity with its innovative cost structure and customer-centric model. Its customer base continues to grow at an impressive pace, propelled by its digital-first strategy. The company is also making substantial strides in expanding its operations across Latin America, particularly in Mexico and Colombia, where adoption is accelerating. With opportunities to penetrate untapped regions, NU’s footprint is poised to expand further. During the third quarter of 2024, the company added 5.2 million customers, bringing its global customer count to 109.7 million. The increasing trend toward digitization is expected to sustain and enhance this growth trajectory.
NU’s revenue model is highly diversified, encompassing streams such as lending, interchange fees, and marketplace services. This diversification not only mitigates risks but also provides stability during economic uncertainties. The company has consistently demonstrated robust revenue growth, driven by higher monetization of its platform and increased user engagement. Key areas like credit cards and personal loans have significantly contributed to its financial success. In the third quarter, NU reported a remarkable 56% year-over-year increase in revenues.
NU’s Strong Returns on Capital
Return on equity (ROE), a measure of profitability, reflects how effectively a company uses its shareholders' investments to generate earnings. NU’s trailing 12-month ROE is 28.7% compared with the industry’s average of 10.8%.