Key Takeaways
- Nu Holdings stock fell 14% in a month after President Lula unexpectedly won Brazil’s Oct. 25 presidential runoff.
- MercadoLibre and other US-listed Brazilian stocks fell with it.
- Nu’s quarterly profit topped $1 billion for the first time in the second quarter.
- For investors who can live with Brazil’s political swings, the drop looks like a chance to load up.
Nu Holdings (NU) stock is down 14% in the past month, and Brazil’s voters did most of the damage.
Investors had bet on Flávio Bolsonaro after his surprise first-round showing. Then President Luiz Inácio Lula da Silva won the Oct. 25 runoff, and Nu sold off along with MercadoLibre (MELI) and the rest of Brazil’s US-listed stocks.
MercadoLibre said its second-quarter revenue grew 50% to $10.2 billion, with Brazil showing the strongest trends. Its report this week covers a quarter that ended before the vote, so what management has seen in Brazil since then matters more than the numbers.
Nu’s own news was quieter. On Oct. 23, it said CTO Eric Young is leaving, and CEO David Vélez is overseeing technology until it finds a replacement. Nu says its priorities haven’t changed, and its numbers haven’t either.
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Nu’s quarterly profit passed $1 billion
In the second quarter, net income passed $1 billion for the first time, revenue grew 39%, and return on equity hit 33%. On Invest Like the Best on Oct. 13, Vélez said that against the big incumbent banks, “we end up with a return on equity that is 2 to 3x their return on equity.”
Loans more than 90 days overdue rose to 6.9% of the book in the second quarter. Management put that mostly down to seasonality, and Nu is also choosing to lend to riskier borrowers.
Analysts expect normalized EPS to more than double from 2025 to 2028.
The cheapest it’s been in three years
At Monday’s close, Nu traded at 4.6x tangible book value, against an 8.3x average over the past three years.
The $18.80 consensus target sits 62% above Monday’s close.
Load up, if you can stomach Brazil
Investors are pricing Nu as if Lula’s win breaks its business, and nothing Nu has reported says it does. With earnings growing and the stock at the bottom of its three-year valuation range, I’d buy, as long as Brazil’s swings won’t shake you out.
If Lula’s next term squeezes Brazilian borrowers, we’ll see it in Nu’s credit numbers first, so listen for what management says about credit since the runoff when Nu reports in the coming weeks.
So what is Nu Holdings stock actually worth?
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Disclaimer:
Please note that the articles on TIKR are not intended to serve as investment or financial advice from TIKR or our content team, nor are they recommendations to buy or sell any stocks. We create our content based on TIKR Terminal’s investment data and analysts’ estimates. Our analysis might not include recent company news or important updates. TIKR has no position in any of the stocks mentioned. Thank you for reading, and happy investing!
