NuBank’s parent company, Nu Holdings, despite its significant size and the backing of Warren Buffett’s Berkshire Hathaway, has often been overlooked by U.S. investors. As one of the world’s largest digital banks, NuBank operates exclusively in Brazil, Mexico, and Colombia, which may explain its limited visibility among U.S. investors.
Since reaching a low point in 2022, Nu Holdings’ stock has seen notable growth. Given its substantial expansion and the potential to enter new markets, it remains a viable investment option.
Nu Holdings experienced challenges with an ill-timed initial public offering (IPO). The IPO occurred as the 2021 bull market came to a close in December, causing the stock to fall from an opening price of $9 per share to below $3.50 within the first six months. However, those who purchased 1,000 shares at $3.50 in spring 2022 would currently possess shares valued at over $11,100, marking an approximate gain of 217%.
The company faces challenges linked to Brazil, which hosts 102 million of NuBank’s 114 million customers. Brazil’s high levels of sovereign debt have exerted pressure on stocks with strong connections to the country. As a result, despite achieving 43% revenue growth in 2024 and a net income increase of 91% year over year, reaching nearly $2 billion, the stock has declined by over 30% since November. Additionally, its price-to-earnings ratio of 27 is relatively moderate for a high-growth company like Nu Holdings.
Nevertheless, the rapid adoption of its services in Mexico and Colombia is gradually reducing its reliance on Brazil. This diversification enhances the likelihood that the fintech company is just beginning to unlock its long-term growth potential, making its earnings multiple increasingly appealing.
Will Healy, a contributor, holds positions in both Berkshire Hathaway and Nu Holdings. The Motley Fool also holds positions in and recommends these companies.
