Nu Stock Just Cratered, and It's 36% off Its High. Is This a Buying Opportunity?
Key Points
Nu has expanded to several new markets, including the U.S., opening new revenue streams.
It continues to add millions of new customers, and its average revenue per active customer is still increasing.
Nu stock trades at under 11 times next year's earnings, making this a good entry point for investors.
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Nu Holdings (NYSE: NU) is a fast-growing digital bank and a former Buffett stock. It's based in Brazil, but it's entering new regions and expanding rapidly.
This is just the kind of tech-based growth stock investors usually love, but it's 36% off its high. Let's see what's happening and whether or not it's the right time to buy.
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The largest digital bank in Latin America
Over the past 12 years, Nu has grown from a small start-up into a major player in Latin American finance. It operates digital financial platforms in Brazil, Mexico, and Colombia, and it's opening in the U.S. It also just launched an international bank servicing 35 countries.
It's been a growth machine and is also highly profitable. Here's how it's performed over the past four quarters:
| Metric | Q3 25 | Q4 25 | Q1 26 | Q2 26 |
|---|---|---|---|---|
| Revenue growth | 39% | 45% | 56% | 39% |
| Gross margin | 43.4% | 40% | 35.8% | 41.5% |
| Net income growth | 39% | 50% | 41% | 49% |
Data source: Nu quarterly reports.
Nu has 140 million customers across its regions, with most in Brazil, where more than half of the adult population has an account. It's still adding customers in Brazil at a fast pace, and it's also making more money from existing customers through cross-selling other products, where it still sees a huge opportunity. It's also reaching affluent customers, who weren't its original core market, through specialized products.
Average revenue per active customer (ARPAC) has been increasing quarterly, which is impressive considering that Nu adds millions of new customers each quarter. It added 4 million in the second quarter, while ARPAC rose from $13 last year to $17 this year. This figure is higher in older cohorts, and it's growing faster in newer markets; in Mexico, for example, it was $16.50 in the quarter, whereas it was $5.60 in Brazil at a similar point in time.
Image source: Nu.
The activity rate continues to rise, reaching 83.5% in the second quarter and 86% in Brazil for the first time. Its credit metrics are also solid despite economic volatility in Brazil. Early delinquencies improved in the second quarter, from 5% last quarter to 4.8%, and net interest margin improved to 12.4%, its highest mark in more than a year.
Why Nu stock is down
The company is performing well and has massive growth opportunities as it expands. So why is it down? It cratered last week after Brazil failed to elect the candidate that's warm to the markets, disappointing investors.
Is this a buying opportunity? Considering the company's excellent prospects, it sure looks like it. And nothing actually changed in Brazil; Luiz Inácio Lula da Silva has been president since 2023 and has just been reelected, marking his fourth term overall.
At the current price, Nu stock trades at less than 11 times forward 1-year earnings, a bargain for a high-growth stock.
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Jennifer Saibil has positions in Nu Holdings. The Motley Fool has positions in and recommends Nu Holdings. The Motley Fool has a disclosure policy.
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