Nu Holdings Stock (NU) Good Growth and Good Value (Q4 2024 Earnings)

Nu Holdings Ltd. (NYSE: NU), the parent company of Nubank, has rapidly established itself as a dominant force in Latin America's fintech sector. With a mission to democratize financial services, the company has grown exponentially, attracting millions of customers seeking digital banking solutions. As Nu Holdings reported its Q4 2024 earnings, the results showcased impressive revenue growth, strong profitability, and a solid customer expansion strategy. Despite some challenges, including currency fluctuations, the company's valuation remains attractive, presenting a compelling investment opportunity. In this article, we will analyze Nu Holdings' latest financial performance, stock valuation, growth potential, and risks to consider.

About Nu Holdings

In the fourth quarter of 2024, Nu Holdings reported revenue of $2.98 billion, marking a 24.34% increase from the $2.4 billion reported in the same quarter of 2023. Earnings per share (EPS) for Q4 2024 stood at $0.11, a significant 57.14% rise from $0.07 in Q4 2023. On a trailing twelve months (TTM) basis, the company achieved revenue of $11.51 billion, up 43.46% from $8.02 billion in the previous year, and an EPS of $0.40, reflecting a 90.48% increase from $0.21 in 2023. Free cash flow per share (TTM) also saw a substantial rise of 92.31%, reaching $0.50 compared to $0.26 in the prior year. It's noteworthy that currency fluctuations, particularly the weakening of the Brazilian Real, impacted reported revenues. On a foreign exchange-neutral basis, Q4 2024 revenue actually increased by 50.5%.

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NU Stock Price Performance and Valuation

As of February 21, 2025, Nu Holdings' stock is trading at $10.82 per share, reflecting a 7.2% increase over the past year. This performance, however, underperforms the S&P 500, which saw a 20.6% rise in the same period. The company's valuation metrics are compelling, with a price-to-sales (P/S) TTM ratio of 4.51, a price-to-earnings (P/E) TTM ratio of 27.05, and a price-to-free cash flow (P/FCF) TTM ratio of 21.64. These figures suggest that the stock is trading at a reasonable valuation, especially considering its growth trajectory.

Nu Holdings Growth Potential

Nu Holdings demonstrates significant growth potential, driven by several key factors:

• Expanding Customer Base: In Q4 2024, the company added 4.5 million new customers, culminating in a total of 114.2 million customers, a 22% year-over-year increase.
• Strong Growth in Mexico: The company's customer base in Mexico experienced substantial growth, contributing to the overall increase in customers.
• Disrupting Traditional Banking: Nu Holdings' low-cost, technology-driven model offers fee-free banking, credit cards, and loans, making it highly attractive in Latin America.
• Large Market Opportunity: Brazil, Mexico, and Colombia where Nu Holdings operates, have a combined population of over 300 million people, many of whom are underbanked.

With a high-growth customer base, expanding financial offerings, and technological innovation, Nu Holdings is well-positioned to continue scaling in the rapidly evolving fintech sector.

Risks to Consider

While Nu Holdings presents a strong growth opportunity, investors should be aware of the following risks:

• Foreign Exchange (FX) Risk: The weakening of the Brazilian Real (BRL) negatively impacts Nu Holdings’ revenue when converted to U.S. dollars. In Q4 2024, on a currency-neutral basis, revenue actually grew 50.5%, but reported revenue growth was only 24.34%.
• Regulatory Uncertainty: The financial sector in Latin America is highly regulated, and changes in banking laws or fintech regulations could impact Nu Holdings’ ability to operate or expand profitably.
• Macroeconomic Risks: High inflation, interest rate fluctuations, and economic slowdowns in Brazil, Mexico, or Colombia could affect consumer spending, credit quality, and loan defaults.
• Competition from Traditional Banks and Other Fintechs: While Nu Holdings has a strong brand and customer base, it faces competition from both traditional banks improving their digital offerings and emerging fintech startups like MercadoLibre

Despite these risks, Nu Holdings remains a high-growth fintech with strong fundamentals and a large addressable market. For long-term investors, these risks should be weighed against the company’s ability to execute its growth strategy and strengthen its market leadership.

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Conclusion

Nu Holdings Ltd. has demonstrated impressive growth since its inception in 2013, revolutionizing the banking sector in Latin America with its customer-centric, technology-driven approach. The company's robust financial performance, strategic expansion plans, and attractive valuation metrics make it a compelling consideration for investors seeking exposure to the fintech sector. While mindful of inherent risks, the potential for continued growth and market penetration positions Nu Holdings as a noteworthy investment opportunity in the evolving financial landscape.