Nu Holdings Ltd - Boomer Banks Terrified, Innovative Banking Platform Grows and Thrives

[Sijoittaja-alokas]

Nu Holdings Ltd is a Brazilian company that offers a digital banking platform.

The company provides services to its customers in five different areas of finance:

• Spending: Customers can pay for their purchases with a credit card or mobile app, while collecting points and rewards.
• Saving: The company offers interest-bearing savings accounts and debit cards to its customers, allowing them to deposit and manage their funds.
• Investing: Customers can invest money in various investment products and services.
• Borrowing: The company offers easily accessible and manageable unsecured loans.
• Insuring: NuInsurance services help customers acquire, for example, life insurance.

Thus, the company offers a comprehensive range of different services related to customers’ finances.

---

This company is one of the fastest-growing fintech companies in the Latin American region. It is a company that is shaking up the banking sector, which has made it Brazil’s second-largest company by market capitalization.

It is telling that Nu Holdings’ annual revenue has grown from $337 million in 2019 to over $6.45 billion (2023), and at least the management believes in continued growth in their statements.

---

Strengths:

The company’s strength comes from its large customer base and strong position in the rapidly growing Latin American markets. The company offers a comprehensive digital banking platform that serves customers’ diverse financial needs, which increases customer loyalty and is also easy to use. The platform is also technologically advanced, enabling scalability and efficiency.

The company’s innovative approach and continuous expansion of its product portfolio give it a competitive advantage over traditional, conservative banks, which have apparently not clearly entered the race, creating potential for significant long-term growth.

Weaknesses:

A significant risk is the company’s high dependence on the Latin American markets, which, from our perspective, are politically and economically unstable. Furthermore, the company’s business model is based on digital services, which makes it vulnerable to cyber threats and technical disruptions, which is, of course, clear and also affects more traditional players. Growth requires continuous investments, which can impact profitability.

---

https://x.com/EconomyApp/status/1823459671702954051

[Thiebault]

Saudien rahasto triplasi positionsa Nu Holdings Ltd:ssa.

The Saudi Public Investment Fund closed out its position in weight loss biotech Allurion Technologies Inc, selling nearly 1.2 million shares. It tripled its position in the Brazilian digital banking company Nu Holdings Ltd NU, adding approximately 2.6 million shares, and added to existing call positions – which are typically seen as bullish - in large technology stocks including PayPal, Microsoft, and Facebook-parent Meta Platforms Inc.

Tech stocks in focus as investors eye latest filings from funds

[Sijoittaja-alokas]

@Thiebault

The Saudi fund tripled its position in Nu Holdings Ltd.

@Heikki_Keskivali’s and @Verneri_Pulkkinen’s friend also owns this.

According to the article below, Buffett has invested in Nu Holdings because the company offers strong growth and profitability prospects. He presumably picked this because he values companies with a sustainable business model and good profitability potential.

Nu Holdings’ growth and cost efficiency likely make it an attractive investment, even though Buffett is somewhat cautious about technology stocks, such as AI.

Is Nu Holdings Ltd. (NU) the Best Stock Warren Buffett Has Bought Since...

[Sijoittaja-alokas]

Nu Holding delivered a strong performance in the third quarter, with revenue and profit growing significantly. The customer base expanded, adding nearly 5.2 million new customers, bringing the total customer count to over 109 million.

The company focused on customer activity and service expansion, which was reflected in growing average monthly revenue per customer. The interest-earning portfolio and deposits grew, strengthening the company’s stable financial position. Nubank’s expansion into Mexico and Colombia has progressed better than expected; additionally, the goal is to solidify its position as the world’s leading digital service platform.

https://x.com/EconomyApp/status/1856811884441473259


https://x.com/TheTranscript_/status/1856814089269289442

[Sijoittaja-alokas]

Here is a good tweet thread about Nuu.

https://x.com/wolfofharcourt/status/1857743748593316127

The rest of the tweet thread

[Sijoittaja-alokas]

I’ve gathered a few tweets below that I think make good points about the company. I’ll refer to them a bit, as well as other things I’ve read about this company lately.

NU Holdings is an undervalued stock according to many, as can be seen from this thread. The company has succeeded in achieving low costs and affordable services for customers on its platform; for example, Latin American banks usually charge high fees, but NU stands out with its affordability.

NU has over 110 million customers, mainly from Brazil, and significant growth potential can be found in the rest of the continent. $MELI, i.e., Mercado Libre (a thread can be found on the Forum), supports NU in payment services and credit solutions, solidifying its position in the region’s markets.

NU’s ability to understand local consumers is a strength in challenging markets, even though its valuation level sparks discussion. Growth prospects and international expansion make it an interesting investment target for many, but it also has its risks, such as certain “instabilities” in this continent.

@Ituhippinen, have you followed this much?

https://x.com/BourbonCap/status/1862510048041111882

https://x.com/BigBullCap/status/1862977231204872566

[Ituhippinen]

@Sijoittaja-alokas

@Ituhippinen, have you been following this much?

I have been following it! And let’s just say, I was close to buying it too. Now I just have so many positions that I need to bring some sense back to my portfolio’s content, once a few special situations resolve and funds are freed up.

The market potential in NU is captivating! In Brazil, penetration is already quite impressive, and user growth there will surely start to slow down. Revenue per customer is therefore the weapon in Brazil to drive growth. In other LatAm countries, user growth plays a larger role. Digital banking services are quite in their infancy there, and NU brings a genuinely affordable opportunity for banking services.

The valuation is not terrible for such a fast-growing company. The stock took a bit of a hit when Berkshire sold 20% of its position a while ago. In addition, the economic situation in Brazil, which I also brought up in Meli’s thread, gave it a bit of a downward push last week.

I need to mull it over, but it’s starting to look quite attractive.

[Hapzu]

To my untrained eye, that has generated 1.3B cash flow in Q1-Q3.

MC = 65B.

Can someone tell this fool where the profit generation is hidden that makes it undervalued?

(I’ve probably misunderstood something again since it’s a bank)

EDIT:

Well, apparently those minuses are not ‘lost money’ but everything should come back?

If so, then it’s dirt cheap ™

Or should this also be left out of the calculation?

Hmm, plenty of risk(?) Bad Loans Pile Up at Nubank, Latin America’s New No. 1 Bank – BNN Bloomberg

[Sijoittaja-alokas]

@Hapzu

Can someone tell this dummy where the profit generation that makes it undervalued is hidden?

Here’s my largely gut feeling, and it’s very possible I’m misunderstanding things :

You already noticed some things yourself, and @Ituhippinen can surely answer better than I can.

Apparently, by looking into the future, i.e., relative to growth expectations, they see it as cheap, in that costs are seemingly high for now and money is spent during a steeper growth phase. Additionally, the company apparently is capable of achieving low costs in the long run and high margins if those services per user start being used more aggressively. However, by aggressively pursuing growth, the profit isn’t strong, and digital services aren’t yet used very extensively there, but “surely” they will be over time. And indeed, aren’t those minuses partly receivables and such that will mostly come back? It should also level out over time, or how should it be understood?

They initially engage customers, and with the potentially significant increase in the use of digital financial services, they imagine they will then generate substantial profit when people start using them and they can expand their operations to other countries.

On the other hand, when this undervaluation has been mentioned, it may largely be based on the bullish statements of the owners. On X, at least in English investment materials, they are most often megabulls. Then one might consider that there could be risks such as dependence on Brazil’s (+ the continent’s) economic and political stability + generally intensifying competition in the digital banking market. Margin pressures due to increasing customer acquisition costs, as well as potential currency fluctuations, etc. (?).

[Ituhippinen]

I don’t know if I can provide a better answer, but I personally view valuation somewhat differently than on a cash flow basis.

In general, banks’ cash flow is somewhat different from other companies, as banks’ business is actually entirely based on money, with money being their product and also a key part of the business itself. If a bank lends money to a customer, it is negative cash flow in accounting. However, it’s usually a good thing that money is lent to customers .

Instead, I prefer to look at net income, which has developed quite well at NU.

This year’s P/E of 28x, which is almost in the books, is not among the cheapest, and it has a clear premium compared to other banks in the region. If we look behind the curtain and consider next year, with analysts’ expectations, the forward P/E is 19x. Still high for a bank, but the growth prospects and actual dominance in Brazil give confidence that market share can be captured in other countries as well.

NU’s ROA is also significantly higher than its peers, which, in my opinion, gives a good indication of how the light cost structure and digital services are positively reflected in the company’s performance. Some kind of premium compared to its peers is therefore probably justified .

Whether this is some kind of generational buying opportunity, I don’t know.

[Sijoittaja-alokas]

Here’s what I think is a good tweet thread about this shop.

Olle talks about Nubank’s strong growth figures, competitive advantages, and the vast opportunities in Brazil and other countries. The valuation and per-share growth prospects are also highlighted in the tweet thread, well… despite possibly temporary challenges, Oliver believes the company offers a growth potential of up to 368 percent in four years.

https://x.com/MMMTwealth/status/1864029977378726223

Rest of the tweet thread

[massimo]

Regarding Nu, Mercado, and a few other Latin American companies, what concerns me most is the complete ignorance of local culture and consumer habits/drivers.

Let’s say, for example, that Nu has now acquired 70% of Brazil’s entire population as customers. Word spreads quickly, and people jump into the service with a low threshold because there are no real alternatives. What happens if, for example, SoFi expands its offerings in South America and enters with a good campaign? Will 30% of customers immediately switch there? Perhaps SoFi makes better customer selections, and only bad loans are left for Nu? Is the technology truly competitive? What’s under the hood..

The same thought applies to other big players like Amazon, which could crush local businesses in many sectors. What is the reason why the big players haven’t entered this market? Instability? Weak purchasing power? Corruption? Is there value in good local players that could be unlocked through an acquisition, or will they simply be swallowed by a larger entity?

There is definitely potential in Nu, but one must look further ahead. At this point, exposure to strong competition is a relevant risk.

[Sijoittaja-alokas]

The article below discusses, among other things, how this company has conquered the market and found a unique place in the fintech sector. After its 2021 IPO, Nu, having risen from difficulties, has offered impressively strong returns, and the article also explains how the company aims to revolutionize financial services in Latin America, which has charmed both consumers and investors, etc.

The article highlights how the company’s investors include Warren Buffett and the risk-taking Cathie Wood from Ark Invest. According to the article, the interest in Nu from representatives of these different styles speaks to the company’s uniqueness.

A turning point occurred this year when Buffett sold 20.7 million shares, nearly 19% of his stake. This move, along with analyst skepticism, has increased uncertainty; although the shares have fallen 27.7 percent from their peak, they are still up 47 percent for the year.

Below is the article about the matter, and there are no paywalls.

https://www.barchart.com/story/news/29899892/citi-says-this-warren-buffett-stock-is-a-sell-here-s-why

[Sijoittaja-alokas]

According to the tweet, the company is growing rapidly and profitably, leveraging its strong market potential, and Nu looks like a promising long-term investment.

Analysts’ consensus estimates show continuous EPS growth:

• 0.41 in 2024
• 0.57 in 2025
• 0.79 in 2026.

AI said:

“FWD PEG stands for Forward Price/Earnings to Growth ratio. It combines a stock’s future P/E ratio (price/earnings) and expected earnings growth. A low FWD PEG, such as 0.53 in this case, suggests that the stock may be undervalued relative to the company’s future growth. Generally, a PEG ratio below 1 is considered attractive to investors.”

https://x.com/DataDInvesting/status/1868695627351392283


[Sijoittaja-alokas]

Jarmo added this to his portfolio.

https://x.com/JarmoFriman/status/1872250054901420450

He quoted this other tweet in connection with his tweet:

https://x.com/MMMTwealth/status/1872244866484408354

[Sijoittaja-alokas]

Considering this company too, these Brazil stories look good.

https://x.com/TheShortBear/status/1875223529249239146

[Sijoittaja-alokas]

Below is a tweet about Nu, a Latin American fintech innovator that is currently attracting a lot of interest among investors.

Recap and new information referenced from the tweet:
The company offers comprehensive banking services, including accounts, loans, and investment solutions, particularly in Brazil, Colombia, and Mexico. NU has 110 million users, and its revenue per user (ARPU) grew to $11, which improves profitability. Expansion into South Africa and the Philippines strengthens the company’s position, and although macroeconomic challenges weaken short-term prospects, the long-term growth potential is strong, thus making NU an attractive option for patient investors.

https://x.com/moneyballinvest/status/1878466173949378593

[Sijoittaja-alokas]

Nu Holdings, the parent company of Nubank, Latin America’s leading digital bank, is considering moving its legal domicile to Britain as part of its future international expansion. According to CEO David Velez, the move is being considered with long-term growth in mind, but changes in taxation and regulation, for example, create uncertainty.

The U.S. market is particularly attractive due to potential regulatory simplifications, but expansion into new countries is not planned within the next year and a half. Nubank already operates in Europe, but the region is not at the top of the priority list for service expansion. The company is also exploring new opportunities in emerging markets.

No paywall.

https://www.reuters.com/business/finance/nubank-ceo-considers-moving-domicile-britain-expanding-us-2025-01-20/

[Sijoittaja-alokas]

The tweeter finds NU interesting because with a 21x P/E ratio, one gets strong growth in customer numbers, revenue, and profit. Additionally, the tweet emphasizes a diverse product portfolio and great international expansion potential, especially in Latin America.

https://x.com/HyperTechInvest/status/1886129724407111844

[Sijoittaja-alokas]

Here’s a good tweet thread about Nuuuu.

Nu is growing rapidly and expanding in Latin America, especially currently in Mexico and Colombia. As hinted earlier in this thread, it offers better service than traditional banks and is already a leader in credit customers in Brazil. According to the tweet, with strong growth, the company can become the largest bank in the region.

EDIT: @Ituhippinen, have you stopped following already or has MELI taken you away?

https://x.com/HyperTechInvest/status/1886129109945786510

Rest of the tweet thread