Nu Holdings (NU 0.06%) stock continues to crush the market. It's up 54% during the past year versus 19% for the S&P 500.
New investors may not realize that Nu was a Warren Buffett stock for several years after its 2021 initial public offering (IPO), but even though Berkshire Hathaway sold its position in 2024, it has well-rewarded investors who held tight.
Let's see what's happening at Nu and if this bank stock could still be a top stock to own five years from now.
Image source: Nu.
Millions of new customers
Nu is a fast-growing digital bank based in Brazil. Although it's only just over a decade old and competing with a handful of entrenched, legacy banks, it has broken through, and today it counts more than 60% of the adult population in the country as customers.
At first, Nu targeted the mass consumer who didn't have access to the established banking system, which still has high costs and significant barriers to entry. Its low fees and easy-to-use interface allows all kinds of customers to engage with the banking system, and those features have attracted new users from all socio-demographic strata. Today, it also has products specifically geared toward the affluent customer as part of its assortment.
It has taken its successful model beyond Brazil, and today it also operates fast-growing businesses in Mexico and Colombia. It's still a fairly small presence in these markets, but it's growing quickly.
Nu added 4.3 million customers in the 2025 third quarter for a total of 127 million, a 16% increase year over year. Most of those customers -- 110 million -- are in Brazil, and it has a huge growth runway in Mexico and Colombia. In five years, Nu is likely to be a much bigger presence in all three countries, with potentially more than half of the population in all of them on its platform.
NYSE: NU
Key Data Points
New ways to monetize them
While the numbers keep growing, Nu still has a limited relationship with many of its users, who may use only one of its products. Part of the company's growth strategy is to cross-sell new products to its customers, deepening engagement and creating a large and thriving ecosystem. In addition to bank accounts and credit cards, it has a growing lending business, and it also offers investing and insurance products.
It recently applied for bank charters in Mexico and Brazil. Until now, it's been operating as a limited financial services company, but with a full bank charter, it will have the ability to offer more products and services in these regions.
One way to track monetization is average revenue per active customer (ARPAC), which is increasing at a steady pace. It rose from $11 last year to $13 this year in the third quarter, and it has increased at a compound annual growth rate (CAGR) of 30% since the company went public in 2021. That CAGR may slow during the next five years, but it should continue to grow as Nu expands its platform and adds customers.
Another way Nu is standing out from the pack is its focus on artificial intelligence (AI). Since it's a native cloud company, it had an edge over the legacy banks in its regions, and it's developing its own large-language models (LLMs) to analyze consumer behavior. It plans to use the data to assess risk and for customer personalization purposes. This could help it sustain its high growth rates during the next five years as it offers greater value for its customers.
New frontiers
Nu has made several recent moves to expand beyond its three existing markets. It announced an investment in a global bank that operates in the Philippines early last year, and it recently applied for a bank charter in the U.S. Management has also implied that it will expand into other markets. Chief Executive Officer David Velez said, "As we think about the next five, 10 years, we are preparing to play in the world -- in the top leagues, in the world class."
Nu could be operating in several more countries within five years from now, including the U.S. I wouldn't expect it to expand too quickly; it's been launching in new markets very deliberately, staying highly profitable to fund its new ventures.
If Nu can pull this all off, which I see as a compelling thesis, expect its stock price to reflect that and be much higher five years from now.
