Nu Holdings reported strong third-quarter results, with earnings per share of $0.11 and revenue of $2.94 billion, beating analyst expectations. The company added 5.2 million new customers in the quarter, bringing its total customer base to 109.7 million, a 23% increase year over year. Average revenue per customer also grew by 25% to $11.
Despite the impressive financial performance, Nu Holdings stock is down 7.9% as of 12:15 p.m. ET on Thursday. The decline is attributed to growing concerns about the macroeconomic environment in Brazil. Brazil’s economy has recently missed some benchmarks and experienced an unexpected rise in inflation.
In response, the country’s central bank is expected to implement further interest rate hikes to combat the trend. Last week, the banking authority raised the core rate by 50 basis points to 11.25%. Gabriel Galipolo, the incoming leader of Brazil’s central bank, emphasized that reaching the 3% inflation target is non-negotiable.
Earnings exceed expectations despite concerns
While he acknowledged that there are multiple potential avenues to achieve this goal, continued interest rate hikes are a likely option. The prospect of rising interest rates in Brazil could negatively impact equity valuations and create business challenges for fintech companies like Nu Holdings.
Nu Holdings has a clear growth strategy that focuses on organic growth through customer acquisition and cross-selling initiatives, as well as geographic expansion. The company plans to continue expanding its active customer base and market share in its core market of Brazil, where it already has 98.8 million customers. The company is also investing in product innovation and expanding into new markets such as Mexico and Colombia.
This geographic expansion is crucial to Nu Holdings’ long-term growth strategy, as it provides access to new customer segments and untapped markets. Despite the recent market volatility, Nu Holdings has a solid track record of growth and profitability. The company’s stock price is up over 87% year-to-date and 77% year-over-year, demonstrating its commitment to efficiency, profitability, and sustainable growth.
Investors considering buying Nu Holdings stock should weigh their individual risk tolerance, investment objectives, and understanding of the company’s business model and future prospects against the potential risks associated with investing in the fintech industry and the current macroeconomic volatility in Brazil.
