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SUMMARY
Parkev Tatevosian, CFA, analyzes Nu Holdings' recent financial performance, expansion into Mexico, and the challenges posed by macroeconomic conditions. The discussion covers profitability improvements, regulatory milestones, and the company's outlook amid global and regional economic pressures.
MAIN POINTS
- Nu Holdings outperforms StoneCo fundamentally despite both underperforming the broader market in 2026.
- The company increases average revenue per user and operating profit margin, aided by artificial intelligence and expansion.
- Nu Holdings receives regulatory approval to operate as a multiple bank in Mexico and announces a $4.2 billion investment plan.
- CEO David Vélez joins OpenAI's board, and the company acquires Banco Porto Real in Brazil, while shares recover from recent lows.
- Macroeconomic headwinds, including U.S. tariffs and rising oil prices, create challenges for Latin American financial services.
- Despite ongoing risks, the analyst maintains a buy rating on Nu Holdings with increased optimism after regulatory approval in Mexico.
DETAILED ANALYSIS
Nu Holdings has demonstrated stronger fundamental performance compared to its peer StoneCo, even though both companies have seen their share prices decline and underperform broader market indices in 2026. The company has achieved significant revenue growth, increasing from approximately $2 billion in 2021 to $17.9 billion in the trailing twelve months. This growth is partly attributed to successful expansion efforts within Latin America, most notably the recent entry into the Mexican market.
The average revenue per user has risen, and the integration of artificial intelligence into credit decision-making processes has led to improved operational efficiency. Operating profit margins have seen a substantial increase, jumping from -7% in 2023 to 25%, and stabilizing around 24% in 2024, which is notable for a company still in its growth phase.
Despite these gains, returns on invested capital have been volatile, peaking at 18% in mid-2024 before declining to 7.5%. This reflects the company's increased capital allocation, which has outpaced profit growth. In the past month, Nu Holdings secured regulatory approval to operate as a multiple bank in Mexico, enabling a broader range of financial services.
The company also announced a $4.2 billion investment plan for Mexico through 2030 and launched the Chroma credit card segment focused on digital services. Additionally, CEO David Vélez's appointment to OpenAI's board could further enhance the company's AI capabilities. The acquisition of Banco Porto Real in Brazil marks another step in regional expansion.
Share prices have rebounded from a low of $11 in early June to $14.75, though they remain down nearly 12% year-to-date. Investors remain cautious due to macroeconomic challenges, including slower economic growth in Brazil and Mexico, U.S. trade barriers, and increased oil prices resulting from geopolitical tensions. These factors heighten risks for financial institutions, as slower growth and higher default risks impact profitability.
Despite these concerns, Nu Holdings is considered a buying opportunity, with increased optimism following the regulatory breakthrough in Mexico, though the conviction level remains moderate due to ongoing economic uncertainties.
LINKS
- YouTube channel membership for exclusive perks and early access.
- Special offer for The Motley Fool Stock Advisor.
- Parkev Tatevosian's book on a six-step investing framework.
- Fiscal.ai investment research platform with a viewer discount.
- Webull investing platform with bonus shares offer.
- Subscribe to Parkev Tatevosian's free monthly Substack newsletter.