Stock Analysis
Nu Holdings Ltd. (NU)
NYSE: NU · Financial Technology - Digital Banking & Consumer Lending (Latin America)
Updated
Rated Watchlist, with a fair value of $13.10 against a last close of $15.16 (-13.6% implied upside). Lula's runoff win hit the real, the rate path and the tax outlook in one night, cutting fair value to $13.10 from $16.00 even as Nu ruled out Monzo; Watchlist holds, interesting at $10.50-$11.00.
- Verdict
- Watchlist
- Fair Value
- $13.10
- Investment Score
- 63/100prev 67.7
Technical read (chart only): Conflicts as of As of 23 October the chart was reclaiming its 200-day average with the 50-day rising, ahead of a Watchlist rating; a gap to the 26 October pre-market level would put the shares below all four averages, so watch whether the $11.20 52-week low holds.The Watchlist verdict comes from the fundamentals alone. The technical read looks only at the price chart. It does not change the verdict or the score and only guides entry timing.
Investment Scorecard
Composite score 63/100 (previous 67.7). Every factor is scored out of 10, ten always being the best outcome, including for risk.
| Factor | Score | Weight | Change | Basis |
|---|---|---|---|---|
| Business Quality | 8/10 | 15% | unchanged | 139m customers, 83.5% monthly activity and a 19.5% efficiency ratio: the lowest cost to serve in the region. |
| Financial Strength | 7/10 | 15% | unchanged | 33% return on equity and $45.3bn of deposits funding a $39.4bn loan book; 90+ day NPL of 6.9% is the soft spot. |
| Competitive Advantage | 8/10 | 15% | unchanged | Cost moat intact; the central bank's new conduct rules apply to every lender, not to Nu alone. |
| Management | 7/10 | 10% | unchanged | Ruled out the Monzo deal within four days; the CTO leaves on 12 November with the founder covering the role on an interim basis. |
| Growth Potential | 7/10 | 15% | -1 vs last report | Revenue grew 39% FX-neutral in the June quarter, but a weaker real cuts dollar growth and 2027 lending rules slow card and loan expansion. |
| Valuation | 4/10 | 20% | -2 vs last report | At $15.16 the shares sat 13.6% above the $13.10 weighted fair value. |
| Risk (10 = lowest risk) (10 = lowest risk) | 3/10 | 10% | unchanged | Post-election currency and rate shock, a pending capital package on cards and loans, a tax rate that may not hold, and NPL near 7%. |
Recent Developments
| Date | Development | Impact |
|---|---|---|
| Monzo acquisition talks ruled out Nu said in a filing it "is not pursuing a transaction with Monzo" after reports of talks valuing Monzo at £8bn-£10bn. Reading: Removes the risk that set the September rating; no acquisition sits in any scenario. The election more than offsets the lift it would have given fair value. | High | |
| First investor day Set for 8 December 2026 in New York. Reading: Likely venue for a medium-term framework and capital plan. | Medium | |
| Third-quarter results Expected mid-November; date not yet announced. Reading: First read on the tax rate and credit after the election. | Medium | |
| Central bank lending conduct rules Resolutions 601-603 approved: consent before credit offers to financially weaker customers, a debt panel before new loans, limits on credit inside Pix payments; effective 31 March and 1 July 2027. No capital risk weights yet; a second package is expected (reported). Reading: Trims 2027 growth at the margin; the pending capital package remains the larger risk. | Medium | |
| Chief technology officer resigns Eric Young leaves on 12 November; CEO David Vélez oversees Global Platforms in the interim with the security chief as co-lead; search under way. Reading: Second technology leader change in about 14 months; no change to strategy stated. | Medium |
Key Risks
| Risk | Probability | Severity | Comment |
|---|---|---|---|
| Central bank capital package on cards and loans | High that it arrives; calibration unknown | High | About 92% of the book is in the targeted lines. |
| Real weakens further and stays weak | Moderate, rising | High | Cuts dollar EPS one for one; the main driver of the fair value cut. |
| Tax rate returns to about 29% | Moderate; higher after the election | High | Worth about 17% of forward EPS. |
| Household credit deteriorates | Moderate, rising | High | 90+ day NPL 6.9% at the half. |
| Technology leadership gap | Low | Low to moderate | CTO leaves 12 November; interim cover by the CEO. |
| Policy rate held higher for longer | High | Moderate | Raises deposit cost; partly offset by funding at 88% of interbank rates. |
| US yields near 5% | Occurred | Moderate | Keeps pressure on growth multiples. |
Scenario Analysis
| Case | Probability | Fair Value | Outlook |
|---|---|---|---|
| Bull | 20% | $19.26 | Real recovers to about 3% weaker, the tax rate proves structural, funding stable, conduct rules light. 2027 EPS $1.07 at 18x. |
| Base | 50% | $14.11 | Real about 7% weaker, tax rate part-normalises, funding cost up, 2027 rules slow card growth. 2027 EPS $0.91 at 15.5x. |
| Bear | 30% | $7.30 | Fiscal slippage, real about 13% weaker, tax rate back to 29%, NPL above 7.5%, tight capital package. 2027 EPS $0.73 at 10x. |
The Case
Nu remains a 139-million-customer bank earning a 33% return on equity, and the end of the Monzo question removed the company-specific doubt behind the September rating. Lula's runoff win moved the real, the rate path and the tax outlook against it in one night, cutting fair value to $13.10 from $16.00. At Friday's $15.16 close the shares were above that value, and at the $11.75 pre-market level the discount does not yet pay for a $7.30 bear case while the currency settles. The name becomes interesting at $10.50-$11.00.
Archived Reports
Beating The Bull keeps every past version of this report on file. Verdicts and numbers reflect what was known when each one was published.
Informational use only. Not financial advice.