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Why Shares of Nu Holdings Fell Today

By Bram Berkowitz – Dec 20, 2021 at 11:27AM

Key Points

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The market has sold off tech and growth stocks recently, and an analyst recently initiated coverage on Nu Holdings.

What happened

Shares of the Brazilian fintech company Nu Holdings (NU -1.04%) fell 8.4% today as growth and tech stocks continued to struggle. An analyst also initiated coverage of the stock.

So what

The digital banking company went public less than two weeks ago with big aspirations, pricing at $9 per share and a $41.5 billion valuation.

Red line with arrow moving downward.

Image source: Getty Images.

The market responded well, driving the stock close to $12 per share, but since then it has sold off along with many other tech and growth stocks, as investors worry about higher inflation, the impact of the omicron COVID-19 variant, and potentially less economic growth in the future than initially projected.

New Street Research analyst Soomit Datta also initiated coverage on Nu today, giving the stock a neutral rating and a $9 price target, which is about where Nu currently trades following today's decline.

Now what

Nu is a terrific growth story. The company completely disrupted the Brazilian and Latin American banking markets, first by offering a credit card with no annual fees, and then by expanding into other banking products such as cash management accounts, online investing, personal loans, and payments capabilities. Nu has quickly accumulated an incredible 48 million customers.

I think the company is very exciting, but the valuation is high. Even the $9 price target from Datta and the $41.5 billion market cap is a testament to the potential of the stock.

Long term, I think this stock could be a winner, but I also think there may be opportunities to enter at a lower price. The valuation is starting to get more reasonable, but I'm not ready to invest quite yet.

Bram Berkowitz has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

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