Prediction: Nu Holdings Will Earn More Than $5 Billion in 2027

Banking may seem boring. Not so when you are Nu Holdings (NYSE: NU). The Brazilian bank has taken its country by storm, with over 100 million customers, is growing rapidly in Mexico, and has just announced a launch in the United States.

Despite all this growth, Nu Bank is seeing a rapid profit inflection due to its highly profitable digital banking model. I predict its net income will increase to $5 billion in 2027, making the stock a great buy for the years ahead. Here's why.

Image source: Nu Holdings.

Rapid growth and Mexico inflection

The growth at Nu Bank has come through massive adoption from everyday consumers in Brazil and, increasingly, Mexico and Colombia. Profits have come from scaling its smartphone-based banking service across 139 million total customers.

Net income was flat in 2023 but has since increased to $3.6 billion over the last 12 months. Last quarter, Nu's net income grew 49% year over year to $1 billion, putting it close to a $5 billion run rate.

If this growth continues through 2027, Nu Bank will easily generate $5 billion in net income for the calendar year. This is also due to Nu Bank's scale in Mexico, which has shifted from losses to profit over the last few quarters.

Long-term earnings growth

Looking at long-term performance, Nu Bank has a fantastic opportunity to grow its revenue and scale its highly efficient financial services offering.

Its monthly cost to serve active customers, which includes technology and customer support, was just $1 and has remained close to this level for years. Its monthly revenue per active customer is $17.10 and growing 22% year over year. As monthly revenue widens compared to cost to serve, Nu will see better earnings in its existing markets.

In Brazil, Nu Bank now has a ton of existing customers but still has plenty of room to grow revenue per customer by adding new spending, savings, and lending solutions. In Mexico, there is a massive opportunity to grow total customers while simultaneously bringing its existing product suite to the country to drive revenue-per-customer growth.

In the years ahead, there is an opportunity to grow in Colombia, the U.S., and perhaps in Latin America. This should keep Nu Holdings' earnings growing for years to come, which is why the stock looks attractive at its current market cap of $68 billion. That is just 13.6 times my $5 billion 2027 earnings estimate, and much lower over a decade.

Brett Schafer has positions in Nu Holdings. The Motley Fool has positions in and recommends Nu Holdings. The Motley Fool has a disclosure policy.