What Happened
Nu Holdings (NU -1.00%) had a rough month as its stock price plummeted 36.6% in May, according to S&P Global Market Intelligence.
The Brazil-based digital bank was well off the pace of the S&P 500, which was essentially flat in May, up 0.2%, and the Nasdaq Composite, which fell 1.9% last month. Nu's stock price is down about 52% year to date, trading at around $4 per share.
Image source: Getty Images.
So what
Nu Holdings is the holding company of Nubank, a digital bank based in Brazil that serves that country, along with Mexico and Colombia. It is considered one of the largest digital banks in the world, with some 60 million customers.
The company went public last December at around $11 per share and it has been trending down ever since. The timing wasn't great, particularly for fintechs, as the Nasdaq Composite has dropped more than 20% since the start of the year. Inflation, rising interest rates, geopolitical risks, and an economic slowdown have all played a role.
The bank released its first-quarter earnings results on May 16 and the stock dropped below $4 per share in the following days. The bank had a $45 million net loss, but that was down from $54 million the previous quarter.
Plus, its growth numbers were strong. The bank added 5.7 million customers year over year, increased deposits 94%, and generated a record $877 million in revenue, up 228% year over year -- beating analysts' estimates. Nu Holdings also increased its revenue per customer by 67%, lowered its average cost to serve customers by 30%, and maintained its low customer acquisition costs.
Now what
The growth numbers are impressive, and they have caught the eye of Warren Buffett, CEO of Berkshire Hathaway, who is an investor in the company. The competitive advantage Nubank has over traditional banks in its markets is its low fees, which it can offer because of its relatively low overhead. It also offers easier access to banking services through its mobile app. Banks in the region typically have higher fees and more complex rules and bureaucracy to deal with.
Nubank has gained market share in its markets, but it is just scratching the surface of the markets it currently serves, not to mention the potential for massive expansion throughout Latin America. It's a stock to keep an eye on.
