Shares of the Brazilian fintech bank Nu Holdings (NU 1.97%) had fallen close to 13% as of 12:37 p.m. ET Monday for no obvious reason, but as the company prepares to report earnings results after the market closes today.
Backed by Warren Buffett and his company Berkshire Hathaway, Nu is a digital bank disruptor in Latin America that first got its start by offering credit cards with no annual fees. It has since built out a much broader product suite that focuses on making access to financial services easier and less costly, as opposed to traditional Brazilian banks, which are known for charging high fees.
Nu has grown quickly. At the end of its last quarter, the bank reported an astounding 54 million customers. The company also has an incredibly low customer acquisition cost of roughly $5, which is one of, if not the lowest in the industry.
It's possible investors are anticipating a poor earnings report from Nu later today. According to Yahoo! Finance, analysts on average expect Nu to roughly break even in the quarter and report revenue of about $624 million.
I'm uncertain about how earnings will come in later today, as many fintech companies have been boom or bust this earnings season. But I'll be looking at how asset quality is faring with higher interest rates and inflation potentially hurting the consumer, although lots of fintech companies haven't seen too much of an impact yet.
I'll also be looking at trends related to average revenue per active customer, which Nu needs to increase to be successful.
Trading around a $19.4 billion market cap, investors currently have an opportunity to invest at cheaper levels than Buffett. While I expect that Nu could definitely face some near-term volatility, I think this is a good long-term buy-and-hold stock at these levels, given Nu's huge opportunity in Latin America.