Will Nu Holdings Stock Double a $1,000 Investment Between Now and 2030?

In its first 12 months as a publicly traded company, Nu Holdings (NYSE: NU) had a disappointing run. Shares were down 62% during the troubling time.

However, this fintech stock has bounced back in remarkable fashion. In the past three years, it has soared 335% (as of Dec. 15), winning over investors thanks to its fantastic financial performance. The business sports a significant market cap of $81 billion today.

Maybe the momentum is set to continue. Will Nu be able to double a $1,000 investment between now and 2030?

Image source: Getty Images.

Latin America was poised for fintech disruption

Having been founded in 2013, it's amazing that Nu has gotten to such a high market cap in a relatively short period of time. One of the main reasons why is because it operates in Latin America, a developing part of the world ripe for a financial services provider to target. Even today, Latin America has a high unbanked and underbanked population.

At the same time, Nu benefited from ongoing smartphone adoption and wider internet coverage. This provides a solid foundation for the company to lean on and thrive.

Nu's growth trajectory speaks for itself. After adding 4.3 million net new customers in Q3 (ended Sept. 30), the business now has 127 million customers in total. That figure is up 15% year over year. With a comprehensive suite of financial services offerings, Nu is a compelling choice for people looking to access banking products offered with a superior user experience.

In the past year, revenue has climbed 42%. And the analyst community's consensus view is that the top line will grow 69% between 2025 and 2027.

Brazil, which has a population of 213 million people (the largest in Latin America), is Nu's home market. More than 60% of the country's adults are Nu's customers. The business is in the early innings in its newer markets of Mexico and Colombia, but it's quickly seeing adoption.

Is Nu building an economic moat?

One of the hallmarks of a high-quality business is the presence of an economic moat. In the banking sector, industry leaders like JPMorgan Chase and Bank of America possess cost advantages and switching costs. These are durable competitive strengths that Nu is likely developing.

When it comes to a cost advantage, Nu's all-digital model lends itself to scalability. This is clear by looking at Nu's profits, with the net profit margin coming in at 18.8% in Q3, up from 0.6% in the same period of 2022. Nu's incredible unit economics, comparing average revenue per customer to the cost to serve each customer, indicates a cost advantage is present.

Banking customers have switching costs because it would be a pain to move accounts over to another provider. Nu's data shows that its older customer cohorts steadily start to use more products and services, an encouraging sign that supports stickiness.

Nu's industry position is certainly strong. But that doesn't mean there isn't competition to think about. The business has to deal with a notable challenger in MercadoLibre that also sees the opportunity in Latin America. This means Nu must stay on top of its game.

Shares are set up for investors to win

In the past three years, Nu shares have rocketed 335% higher. This translates to a 63% compound annual rate of return, which is tremendous. For the stock to double between now and 2030, it implies a more modest 15% yearly increase. It's certainly reasonable to expect the huge past returns not to repeat going forward.

Based on the company's stellar competitive positioning and its impressive revenue and profit growth, there's a very good chance that Nu turns a $1,000 investment into $2,000 in five years. The valuation looks attractive, with shares trading at a forward price-to-earnings ratio of 21, adding another potential tailwind to the mix.

JPMorgan Chase is an advertising partner of Motley Fool Money. Bank of America is an advertising partner of Motley Fool Money. Neil Patel has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends JPMorgan Chase and MercadoLibre. The Motley Fool recommends Nu Holdings. The Motley Fool has a disclosure policy.