To The Moon

$Nu Holdings Ltd.(NU)$

Nu Holdings is a digital financial services company that’s making waves across Latin America, especially by catering to a segment that traditional banks have historically underserved: the underbanked. With an intuitive digital platform, aggressive expansion strategy, and innovative financial products, Nu has seen explosive growth in recent years. But for investors, growth alone isn’t the whole story.

The real question is: Is Nu Holdings stock a buy at today’s prices? That’s exactly what I’ll be digging into in this video. I’ll break down the company’s revenue trajectory over the past several years, analyze profit margins and capital efficiency, and show you my proprietary discounted cash flow (DCF) valuation. We’ll also take a look at valuation from a forward price-to-earnings perspective to get a more well-rounded view. And by the end of this video, I’ll let you know where I stand—whether I think Nu Holdings offers a compelling opportunity at current levels.

Now, let’s start with the business model.

Nu Holdings operates as a digital-first bank across Brazil, Mexico, Colombia, and a growing number of other Latin American markets. The company began with a simple, user-friendly credit card and has since expanded into digital checking accounts, personal loans, insurance products, and even investments—all integrated into a single mobile app experience.

This approach has allowed Nu to rapidly onboard tens of millions of users. In fact, the company now serves over 90 million customers, making it one of the largest digital banking platforms globally, not just in Latin America.

But as with any high-growth fintech, it’s important to understand how that growth is evolving—especially in today’s macro environment.

Growth Is Slowing — But That’s Not the Whole Story

Like many high-growth businesses, Nu has experienced a deceleration in its revenue growth rate over the past three years. That slowdown isn’t unique to Nu—it’s part of a broader macroeconomic trend. Central banks across the globe, including those in Latin America, have significantly raised interest rates in an effort to bring down inflation. Higher interest rates increase the cost of capital, which acts like a speed bump for companies that rely on aggressive expansion strategies.

In response to these challenges, Nu made a conscious decision to pivot from pure user growth to more profitable growth. Instead of simply acquiring new customers for the sake of expanding its footprint, the company is now focusing on acquiring high-quality, revenue-generating users—those more likely to use multiple Nu products and repay their debts on time.

That decision has paid off. In the most recent quarter, Nu still managed to grow its revenue by 25% year-over-year. That’s a robust number—especially when you consider the broader environment and the fact that many fintech peers are struggling just to maintain positive growth.

A Massive Untapped Market

One of Nu’s greatest strengths lies in its total addressable market. Latin America has a large population of people who are either underbanked or entirely unbanked. These are individuals who don’t have access to affordable loans, fair interest rates, or modern digital banking solutions. Nu’s mobile-first, low-fee platform is tailor-made for this demographic.

And as smartphone adoption continues to rise across the region and younger generations demand more flexible, digital-first financial solutions, Nu is perfectly positioned to capture that growing demand.

But, of course, the region isn’t without its risks. Latin America is known for political and economic volatility, and that means investors have to price in a certain level of unpredictability.

Risks Around the Loan Portfolio

One of the biggest concerns with Nu Holdings right now—and it’s a legitimate one—is its loan portfolio. As Nu expands its lending operations, it inevitably takes on credit risk. And while the company is working hard to focus on higher-quality borrowers, it still operates in a relatively volatile part of the world.

If we were to see a sharp economic downturn, there's a real possibility that default rates on Nu’s loans could spike. That would hurt revenue, profitability, and possibly even confidence in the business model.

We’ve already seen early signs of rising delinquency rates, even though the macroeconomic environment hasn’t deteriorated that dramatically. That’s a warning flag. While it's not a reason to panic, it’s definitely something to monitor closely—especially since Nu has only been a public company for a few years, and we don’t have much historical data on how it performs through a full economic cycle.

Still, the company’s strategic shift toward profitable customers and better risk management practices is encouraging. It shows that management is aware of the potential risks and is proactively trying to manage them.

Profitability Metrics Are Impressive

Despite the macro headwinds, Nu’s profitability metrics are looking increasingly attractive.

Take operating cash flow as a percentage of sales—this metric soared in 2022 and 2023, and it’s now hovering around 29%, which is an outstanding figure for a still-growing fintech. That level of operational efficiency is rare for a company in the expansion phase.

We also see this in return on invested capital (ROIC). Nu’s ROIC has risen sharply, from just under 5% in 2022 to 25% today. That’s a huge leap in capital efficiency, and it speaks to management’s ability to allocate resources effectively. If this trend continues—and I think it will, assuming no severe economic shocks—Nu could become a financial powerhouse.

Valuation: Undervalued Relative to Intrinsic Worth

Now let’s turn to valuation.

Based on my discounted cash flow analysis, I estimate Nu Holdings’ intrinsic value per share is around $20. That’s almost double its current share price of about $10.40.

Here’s what went into that calculation:

• Cost of capital: 12.73%

• Cost of debt: 8.12%

Despite those relatively high financing costs, the company’s future cash flows—when discounted to present value—easily support a higher valuation. That tells me the market is underestimating Nu’s long-term earnings power.

From a forward P/E standpoint, Nu is trading at just 13x forward earnings. That’s incredibly low for a company that’s:

• Growing revenue at 20%+ annually

• Generating 29% in cash flow from operations

• Posting ROIC of 25%

You’d typically see a valuation like that for a slow-growing or cyclical business—not a high-growth fintech with a massive market opportunity. So, why the disconnect?

The answer, of course, is risk—specifically around the loan book. Investors are worried about what might happen if the region slips into recession or if default rates spike significantly. But in my view, those risks are already baked into the stock price.

Final Thoughts: Is Nu Holdings a Buy?

When I weigh everything—the company’s massive market opportunity, strong growth, impressive profitability metrics, and undervaluation relative to intrinsic value—I come to the conclusion that Nu Holdings is a buy.

Yes, there are risks. The loan portfolio and economic environment are valid concerns. But those risks are now reflected in the price. And for long-term investors who can stomach some volatility, I believe the risk/reward setup is compelling. This is a company with the potential to become the leading digital bank in Latin America—and possibly beyond.

Nu Holdings isn’t just a fintech stock. It’s a bet on the future of banking in emerging markets.

And at around $10 a share, I think it's a bet worth taking.

Disclaimer: I want to make it clear that I am not a financial advisor, and nothing I say is intended to be a recommendation to buy or sell any financial instrument. Additionally, it's important to remember that there are no guarantees or certainties in trading or investing, and you should never invest money that you can't afford to lose.

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