What happened
Shares of the Brazilian fintech company Nu Holdings (NU -3.01%) 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.
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.
