Nu Holdings (NU 0.03%), one of Latin America's fastest-growing fintech companies, has seen its stock rally nearly 80% since it went public at $9 in December 2021. But over the past 12 months, its stock only rose 6% as the S&P 500 advanced nearly 20%. Let's see why it underperformed the market -- and if it's worth buying as the bulls look the other way.
Meet Latin America's biggest digital bank
Nu owns NuBank, the largest digital-only direct bank in Latin America. Its three biggest markets are Brazil, Mexico, and Colombia. By streamlining its services online and locking in its customers with no-fee credit cards, it expanded much faster clip than its regional brick-and-mortar competitors.
Image source: Getty Images.
From the end of 2021 to the second quarter of 2025, Nu's total number of customers soared from 53.9 million to 122.7 million, its activity rate (its active customers divided by total customers) rose from 76% to 83%, and its average revenue per customer (ARPAC) skyrocketed from $4.50 to $12.20.
From 2021 to 2024, its revenue grew at a CAGR of 89%. It turned profitable on a generally accepted accounting principles (GAAP) basis in 2023, and its earnings per share (EPS) nearly doubled in 2024. That explosive growth was supported by its rollout of more credit cards, lending services, e-commerce services, and cryptocurrency trading tools.
NYSE: NU
Key Data Points
But its growth is decelerating and its margins are shrinking
Over the past year, Nu's year-over-year growth in customers and total revenues decelerated -- but its activity rate and ARPAC rose as its average costs for serving each active customer held steady. Its growth cooled off as it saturated the Brazilian market (where it serves over 60% of the adult population), faced tougher competition from other leading fintech platforms like MercadoLibre's (MELI +4.86%) Mercado Crédito, and intentionally throttled the expansion of its credit business as its non-performing loans increased.
|
Metric |
Q2 2024 |
Q3 2024 |
Q4 2024 |
Q1 2025 |
Q2 2025 |
|---|---|---|---|---|---|
|
Customer growth (YOY) |
25% |
23% |
22% |
19% |
17% |
|
Monthly activity rate |
83% |
84% |
83.1% |
83.2% |
83.2% |
|
ARPAC |
$11.20 |
$11.00 |
$10.70 |
$11.20 |
$12.20 |
|
Average cost to serve each active customer |
$0.90 |
$0.70 |
$0.80 |
$0.70 |
$0.80 |
|
Revenue growth* (YOY) |
65% |
56% |
58% |
40% |
40% |
Data source: Nu Holdings. YOY = Year-over-year. *Currency neutral basis.
Meanwhile, Nu's gross and net interest margins declined as it expanded more aggressively in Mexico and Colombia -- where it only serves roughly 13% and 10% of the adult populations, respectively -- to gradually curb its dependence on the Brazilian market.
Both of those smaller markets require higher funding costs and credit loss allowances than Brazil. The expansion of its lower-margin secured lending and payroll-backed loans business exacerbated that pressure.
|
Metric |
Q2 2024 |
Q3 2024 |
Q4 2024 |
Q1 2025 |
Q2 2025 |
|---|---|---|---|---|---|
|
Gross margin |
48% |
46% |
45.6% |
40.6% |
42.2% |
|
Net interest margin |
19.8% |
18.4% |
17.7% |
17.5% |
17.7% |
|
Net income growth* (YOY) |
77% |
63% |
85% |
74% |
42% |
Data source: Nu Holdings. YOY = Year-over-year. *Currency neutral basis.
That mix of slowing growth, slipping margins, and messy macro headwinds in Latin America likely prevented the bulls from aggressively buying Nu's stock. That might be why Warren Buffett's Berkshire Hathaway (NYSE: BRK.A) (NYSE: BRK.B), which bought 107 million shares of Nu in late 2021, liquidated its entire stake over the past 12 months.
Should contrarian investors accumulate Nu's stock today?
From 2024 to 2027, analysts expect Nu's revenue and EPS to grow at a CAGR of 28% and 38%, respectively. Its business is gradually maturing, but those are still incredible growth rates for a stock that trades at 20 times next year's earnings.
Nu's top like growth and margins should stabilize as it scales up its business in Mexico and Colombia. Its recent application for a U.S. bank charter also indicates it's interested in expanding overseas to curb its long-term dependence on the volatile Latin American market.
I believe Nu has plenty of room to grow, and it still looks like a compelling investment even though Warren Buffett sold the stock. It might stay in the penalty box for a few more quarters, but it should soar higher over the next few years as it penetrates its newer markets.
