After reaching 80 million customers, the stock of the Brazilian fintech giant Nu Holdings Ltd. (NYSE: NU) climbed as high as 9% over the following days. The Warren Buffet backed company has been showing continuous growth in customers and revenues despite the economic environment it is operating in and it is not showing any signs of slowing down. To reach this success, NU has been capitalizing on the untapped market of unbanked individuals in Brazil and most importantly those without credit cards. With NU set to report its Q1 earnings soon, the stock could be an exceptional long play if it beats its estimates in similar fashion to the previous quarters.
NU Fundamentals
The Brazilian bank’s upcoming earnings are right around the corner with it to report its Q1 earnings on May 15th afterhours, where analysts expect it to report a revenue of $1.3 billion and an EPS of 0.02. Looking back at the history of NU’s earnings, the company has beat its estimates during its last 5 earnings since its IPO. As a result, NU’s stock has always soared following each one of its earnings events, climbing 12% after its last earnings while rising a whooping 26% following its Q2 earnings. As NU witnessed another massive growth in its customer base during Q1, NU could be set to beat its estimates once again after its upcoming earnings which might cause its stock price to increase once again in similar fashion to previous earnings events. But here’s why NU has continuously beat its earnings over the previous quarters and why it could be set to do it again.
Having the backing of one of the biggest American investors Warren Buffett, NU has around 107 million of its shares owned by Berkshire Hathaway – the holding company owned by the Oracle of Omaha.
With NU operating in Brazil, Mexico and Colombia, the company targets a total population of around 392.5 million people. The company has an ever growing customer base with the company recently stating that its customer base has reached 79.1 million in Q1 2023 which is a 33% increase compared to the year prior. Notably, 75.2 million of these clients are in Brazil, however, the company also stated that its customer base in Mexico and Colombia increased by 66% over the same period. This number further increased in April reaching 80 million customers across the three countries. Most importantly, The company’s CEO David Velez stated that this growth would translate into more revenues per customer.
By offering a multitude of different services, NU has a variety of revenue streams per customer including offering free digital bank accounts with no fees apart from a fee of R$6.5 for ATM withdrawals. Opening a free digital bank account could entice customers to explore NU’s other services bringing in more revenue from a single customer such as personal loans with varying interests depending on the customer and a life insurance option starting at a R$9 per month. NU also offers completely free credit cards, where it gains profit by getting a small percentage from the establishment where the customer uses his card to complete a purchase through the mastercard network. All of these services can be found in one convenient place through NU’s smartphone application removing any necessary physical interaction between the customer and the bank.
Introducing a new digital currency called Nucoin, NU could attract more customers further increasing its customer base. Nucoin is a form of cryptocurrency that has no expiration date which is a part of a loyalty program that rewards the customer’s engagement with NU’s platform. Customers can hold their Nucoins to level up and unlock further benefits including coin-back rewards and lottery tickets, or sell them to other customers in exchange for cash. NU describes this loyalty program as revolutionary and expects further development with its general manager Fernando Czapski stating “We expect to see many further developments as Nucoin is out there in the market and blockchain technology expands its reach.”. Nucoin could increase the number of active customers in the future while also bringing in new customers.
One of NU’s biggest feats is the bank’s revenue growth despite operating in an uncertain economic environment. NU went through the largest recession in Brazil during 2015 and 2016 where the country’s GDP decreased by 3.5% in 2015 and another 3.5% in 2016 in addition to the political uncertainty clouding the 3 countries it operates in. Despite these headwinds, NU has survived as its customer base increased from less than 100,000 at the start of 2015 to nearly 1.2 million at the end of 2016 and has been continuously racking up revenues with its revenues growing 171% YoY in 2022.
Moreover, the bank is expected to report its final loss in 2022 according to the 11 American bank analysts, where it’s expected to turn profits of approximately $370 million in 2023. NU already reported its first quarterly profits during its Q3 2022 earnings where it reported a net profit of $7.8 million. As a result, NU bank could be a great long term investment in anticipation of its 2023 annual financial report.
The reason behind NU’s rapid growth is due to its utilization of the unbanked population in Brazil where only 70% of Brazilians had an account at a bank or at any other financial institution in 2017. Additionally, only 27% of Brazilians owned a credit card in 2017 due to the difficulty of obtaining one in the country. To further explain, Brazilians can be denied a credit card if they have a history of debts in the database of Serasa – a 50 year old Brazilian company responsible for a complete database containing information on private individuals and legal entities. They can also be denied a credit card if more than 30% of their income is compromised with the payment of any financing such as loans or installments for example.
To capitalize on this untapped market, NU started offering credit cards to individuals who aren’t able to obtain a credit card due to the previously mentioned reasons resulting in NU having around 32 million credit card active users as of Q3 2022. At the start of this year, NU started offering credit cards to customers between the age of 12 and 17 years old as long as it is requested by their legal guardian which could cause these young individuals to be lifelong customers. However, this could be a risky approach for NU causing it to have a significant amount of unpaid debts by its customers in the future.
NU Financials
In its 2022 annual report, NU reported $29.9 billion in assets including $4.1 billion in cash and equivalents, $8.2 billion in credit card receivables, and $1.6 billion in loans. NU witnessed growth in assets from $19.8 billion including an increase in cash and equivalents from $2.7 billion, an increase in credit card receivables from $4.7 billion and an increase in loans from $1.1 billion. NU liabilities grew YoY from $15.4 billion to $25 billion as its deposits increased from $9.6 billion to $15.8 billion and its borrowings increased from $147.2 million to $585.6 million.
NU revenues grew YoY from $1.6 billion to $4.7 billion and its gross profit increased from $732.9 million to $1.6 billion. However the company’s net loss widened YoY from $165.3 million to $364.6 million.
Technical Analysis
NU stock trend is bullish as it is trading in an upwards channel.
Looking at the indicators, NU stock is currently trading above the 21 MA, the 50 MA, and the 200 MA which is a bullish sign. The RSI is approaching overbought at 60 and the MACD is bearish.
Fundamentally, NU stock’s most recent catalyst was the announcement of the company reaching 80 million customers while one of its upcoming catalysts is its Q1 earnings on May 15th.
NU stock price is expected to increase in light of its upcoming earnings report if it does beat estimates similarly to its past earnings. A possible play would be going long with an entry point would be on testing the 21 MA, taking profits on testing the upper trend line while leaving a tail for if the stock breaks through the channel and tests the $6.44 resistance.
NU Forecast
With NU reaching 80 million customers last month, the company could be set to continue its streak of milestones in the future as it is expected to realize profits soon. NU could increase this number of customers even more having started its new loyalty program by offering its customers the newly formed digital currency Nucoin as a reward for their engagement. Notably, NU has already proved its worth after surviving the 2015/2016 Brazilian recession. In addition to continuing to grow with its revenues constantly increasing over the years despite the everlasting uncertain economic environment where it is operating. To achieve such success, NU capitalized on the untapped market of unbanked Brazilians by offering credit cards to individuals who aren’t able to obtain ones at other banks while also offering credit cards to customers under the age of 18. Based on these reasons and having the backing of Warren Buffett, the NU stock forecast could be promising in 2023 and beyond. Finally, NU stock could be one of the best stocks to buy now in anticipation of its upcoming Q1 earnings.
NU Fundamentals
The Brazilian bank’s upcoming earnings are right around the corner with it to report its Q1 earnings on May 15th afterhours, where analysts expect it to report a revenue of $1.3 billion and an EPS of 0.02. Looking back at the history of NU’s earnings, the company has beat its estimates during its last 5 earnings since its IPO. As a result, NU’s stock has always soared following each one of its earnings events, climbing 12% after its last earnings while rising a whooping 26% following its Q2 earnings. As NU witnessed another massive growth in its customer base during Q1, NU could be set to beat its estimates once again after its upcoming earnings which might cause its stock price to increase once again in similar fashion to previous earnings events. But here’s why NU has continuously beat its earnings over the previous quarters and why it could be set to do it again.
Having the backing of one of the biggest American investors Warren Buffett, NU has around 107 million of its shares owned by Berkshire Hathaway – the holding company owned by the Oracle of Omaha.
With NU operating in Brazil, Mexico and Colombia, the company targets a total population of around 392.5 million people. The company has an ever growing customer base with the company recently stating that its customer base has reached 79.1 million in Q1 2023 which is a 33% increase compared to the year prior. Notably, 75.2 million of these clients are in Brazil, however, the company also stated that its customer base in Mexico and Colombia increased by 66% over the same period. This number further increased in April reaching 80 million customers across the three countries. Most importantly, The company’s CEO David Velez stated that this growth would translate into more revenues per customer.
By offering a multitude of different services, NU has a variety of revenue streams per customer including offering free digital bank accounts with no fees apart from a fee of R$6.5 for ATM withdrawals. Opening a free digital bank account could entice customers to explore NU’s other services bringing in more revenue from a single customer such as personal loans with varying interests depending on the customer and a life insurance option starting at a R$9 per month. NU also offers completely free credit cards, where it gains profit by getting a small percentage from the establishment where the customer uses his card to complete a purchase through the mastercard network. All of these services can be found in one convenient place through NU’s smartphone application removing any necessary physical interaction between the customer and the bank.
Introducing a new digital currency called Nucoin, NU could attract more customers further increasing its customer base. Nucoin is a form of cryptocurrency that has no expiration date which is a part of a loyalty program that rewards the customer’s engagement with NU’s platform. Customers can hold their Nucoins to level up and unlock further benefits including coin-back rewards and lottery tickets, or sell them to other customers in exchange for cash. NU describes this loyalty program as revolutionary and expects further development with its general manager Fernando Czapski stating “We expect to see many further developments as Nucoin is out there in the market and blockchain technology expands its reach.”. Nucoin could increase the number of active customers in the future while also bringing in new customers.
One of NU’s biggest feats is the bank’s revenue growth despite operating in an uncertain economic environment. NU went through the largest recession in Brazil during 2015 and 2016 where the country’s GDP decreased by 3.5% in 2015 and another 3.5% in 2016 in addition to the political uncertainty clouding the 3 countries it operates in. Despite these headwinds, NU has survived as its customer base increased from less than 100,000 at the start of 2015 to nearly 1.2 million at the end of 2016 and has been continuously racking up revenues with its revenues growing 171% YoY in 2022.
Moreover, the bank is expected to report its final loss in 2022 according to the 11 American bank analysts, where it’s expected to turn profits of approximately $370 million in 2023. NU already reported its first quarterly profits during its Q3 2022 earnings where it reported a net profit of $7.8 million. As a result, NU bank could be a great long term investment in anticipation of its 2023 annual financial report.
The reason behind NU’s rapid growth is due to its utilization of the unbanked population in Brazil where only 70% of Brazilians had an account at a bank or at any other financial institution in 2017. Additionally, only 27% of Brazilians owned a credit card in 2017 due to the difficulty of obtaining one in the country. To further explain, Brazilians can be denied a credit card if they have a history of debts in the database of Serasa – a 50 year old Brazilian company responsible for a complete database containing information on private individuals and legal entities. They can also be denied a credit card if more than 30% of their income is compromised with the payment of any financing such as loans or installments for example.
To capitalize on this untapped market, NU started offering credit cards to individuals who aren’t able to obtain a credit card due to the previously mentioned reasons resulting in NU having around 32 million credit card active users as of Q3 2022. At the start of this year, NU started offering credit cards to customers between the age of 12 and 17 years old as long as it is requested by their legal guardian which could cause these young individuals to be lifelong customers. However, this could be a risky approach for NU causing it to have a significant amount of unpaid debts by its customers in the future.
NU Financials
In its 2022 annual report, NU reported $29.9 billion in assets including $4.1 billion in cash and equivalents, $8.2 billion in credit card receivables, and $1.6 billion in loans. NU witnessed growth in assets from $19.8 billion including an increase in cash and equivalents from $2.7 billion, an increase in credit card receivables from $4.7 billion and an increase in loans from $1.1 billion. NU liabilities grew YoY from $15.4 billion to $25 billion as its deposits increased from $9.6 billion to $15.8 billion and its borrowings increased from $147.2 million to $585.6 million.
NU revenues grew YoY from $1.6 billion to $4.7 billion and its gross profit increased from $732.9 million to $1.6 billion. However the company’s net loss widened YoY from $165.3 million to $364.6 million.
Technical Analysis
NU stock trend is bullish as it is trading in an upwards channel.
Looking at the indicators, NU stock is currently trading above the 21 MA, the 50 MA, and the 200 MA which is a bullish sign. The RSI is approaching overbought at 60 and the MACD is bearish.
Fundamentally, NU stock’s most recent catalyst was the announcement of the company reaching 80 million customers while one of its upcoming catalysts is its Q1 earnings on May 15th.
NU stock price is expected to increase in light of its upcoming earnings report if it does beat estimates similarly to its past earnings. A possible play would be going long with an entry point would be on testing the 21 MA, taking profits on testing the upper trend line while leaving a tail for if the stock breaks through the channel and tests the $6.44 resistance.
NU Forecast
With NU reaching 80 million customers last month, the company could be set to continue its streak of milestones in the future as it is expected to realize profits soon. NU could increase this number of customers even more having started its new loyalty program by offering its customers the newly formed digital currency Nucoin as a reward for their engagement. Notably, NU has already proved its worth after surviving the 2015/2016 Brazilian recession. In addition to continuing to grow with its revenues constantly increasing over the years despite the everlasting uncertain economic environment where it is operating. To achieve such success, NU capitalized on the untapped market of unbanked Brazilians by offering credit cards to individuals who aren’t able to obtain ones at other banks while also offering credit cards to customers under the age of 18. Based on these reasons and having the backing of Warren Buffett, the NU stock forecast could be promising in 2023 and beyond. Finally, NU stock could be one of the best stocks to buy now in anticipation of its upcoming Q1 earnings.