Prediction: Nu Holdings' Sell-Off on Monday Is an Opportunity

Everything seems to make sense, on the surface. Shares of Nu Holdings (NYSE: NU) plummeted 10% on Monday, after Bloomberg reported over the weekend that the Latin American fintech was eyeing a purchase of smaller European fintech Monzo.

Why is a company that is dominant in Brazil, gaining ground in Mexico and Colombia, and pushing for a stateside launch, reportedly willing to pay the U.S. equivalent of $10.6 billion to $13.2 billion for a fast-growing online banking platform from the United Kingdom? It's already juggling too many plates.

It's doing so well right now. The rest of the world can wait. Could this mean that Nu sees growth decelerating sharply in the near future, prompting an acquisition to mask an organic slowdown? Well, I don't see it that way. I argue that Monday's reaction isn't just an overreaction. It's the wrong reaction.

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Making sense of the math

With more than 4.8 billion shares outstanding, Monday's 10% drop for Nu Holdings stock shed $6.5 billion of its market cap in a single trading session. This is half of the high end that Nubank's parent company is presumably willing to pay for Monzo. If the consensus is that Nu is potentially paying too much, Monday's haircut whittles that down.

If the bearish knock is that Nu is aiming too high -- flying when it's just starting to crawl outside of Latin America -- it's an odd look to find an aggressive growth stock get penalized for being too aggressive. This is an opportunity to establish itself in a new part of the world. Waiting longer will only push price tags and the number of competitors higher.

What does Monzo bring to the table? It closed out its fiscal 2026 with 15.2 million customers. Nearly half of its 10.4 million monthly active users rely on Monzo's digital platform to be their primary bank. Revenue soared 39% for the year to the U.S. equivalent of $2.25 billion. It's profitable, closing out 2026 with an adjusted profit margin of 10%.

If those numbers are impressive for a potential buyout candidate, have you checked out Nu? Revenue also rose 39% for Nu in its latest quarter, but a lot more of those top-line results are making their way down to the bottom line. Nu's net margin has topped 40% for four straight quarters. At the very least, Nubank can teach Monzo some new -- or dare I say, Nu -- tricks to improving monetization and boosting engagement.

Nu is the Rio thing

In a world of fintech stocks, it's hard to match the combination of top-line growth, operational excellence, and compelling valuation that Nu brings to the table. This will be the sixth consecutive year that Nu delivers at least 30% growth. Since turning profitable in 2023, the bottom line has grown even faster than the top line each year.

Nu's ability to boost average revenue per user while keeping its account servicing costs low has created a fast-growing, high-margin machine that investors don't want to bet against.

Nubank was serving 138.9 million accounts at the end of June, a 13% increase over the past year. This may not seem like a lot, but it accumulates like a snowball rolling downhill. Customer deposits have risen 18% over the past year. Nu's credit card and loan portfolio has widened 37% in that time. Average revenue per active user has jumped 22% to $17.10 per month, while it continues to cost roughly $1 per month to service an account.

Turning a 13% increase in users over the past year into a 39% jump in revenue isn't happening because Nu is getting greedy. It's because its customers are becoming hungrier to center their banking lives around the fintech platform. Given Nu's scalability advantages, earnings soared 49% in its latest quarter.

You would expect to pay a healthy market premium for a fintech that's growing revenue at 3 times its user growth rate, with profitability moving even faster. You're not. Nu Holdings is trading for 14 times this year's earnings and a mere 11 times next year's analyst profit target.

Nu was cheap before Monday's markdown. It's only cheaper now.

One final note about Monzo, if it even does happen. Nu is doing all of this with the lion's share of its business still coming from Brazil. It's making a stateside push, but that is in the early stages. Since applying for its U.S. national bank charter 12 months ago and receiving conditional approval this year, it's just now getting started. It launched with a third-party partner earlier this month, targeting next year for Nubank's stateside debut. It even secured naming rights for the new stadium in Florida, where Lionel Messi's Inter Miami team plays, before its offerings were available in this country.

Now it has a shot to cut through the regulatory hoops and rollout growing pains in Europe with an established and fast-growing player. This is a move that should be rewarded, not punished. All it did was make Nu stock even cheaper, with the upside that much higher.

Rick Munarriz has positions in Nu Holdings. The Motley Fool has positions in and recommends Nu Holdings. The Motley Fool has a disclosure policy.