Nu Holdings Ltd. NU will report first-quarter 2025 results on May 13, after market close.
The Zacks Consensus Estimate for revenues in the to-be-reported quarter is $3.5 billion, indicating 27.6% year-over-year growth. The consensus estimate for total earnings is pinned at 12 cents per share, suggesting a 33.3% jump from the year-ago quarter's actual. There has been no change in analyst estimates or revisions lately.
Zacks Investment Research
Image Source: Zacks Investment Research
NU has an impressive earnings surprise history. In the four trailing quarters, it surpassed the Zacks Consensus Estimate, with an average surprise of 10%.
Nu Holdings Ltd. Price and EPS Surprise
Nu Holdings Ltd. price-eps-surprise | Nu Holdings Ltd. Quote
NU Showcases Lower Chances of Posting Q1 Earnings Beat
Our proven model does not conclusively predict an earnings beat for NU this time around. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the odds of an earnings beat. But that is not the case here. You can uncover the best stocks to buy or sell before they are reported with our Earnings ESP Filter.
NU has an Earnings ESP of 0.00% and a Zacks Rank #3 at present. You can see the complete list of today’s Zacks #1 Rank stocks here.
Higher Customer Wins to Have Been Nu Holdings' Driver in Q1
The consensus estimate for interest income and gains is pegged at $2.9 billion, suggesting an increase of 29.8% from the year-ago quarter’s actual. The Zacks Consensus Estimate for fee and commission income is pegged at $529.4 million, indicating a 16.2% year-over-year rise.
For active customers, the consensus mark is pinned at 97.6 million, implying an 18.1% increase from the year-ago quarter’s actual. NU’s customer-centric approach across Brazil, Mexico and Colombia is likely to have led to more customer wins.
NU Stock Soars
Nu Holdings' shares have gained 23.8% in the year-to-date period outperforming the 16.1% rise of its industry and the 4.4% fall of the Zacks S&P 500 composite. The company has performed better than its industry peers, Bank Of Montreal BMO and Bank of Nova Scotia BNS. BMO has gained 2.6% while BNS has declined 6.5% for the same period.
YTD Price Performance
Zacks Investment Research
Image Source: Zacks Investment Research
The NU stock is looking pricier than the Bank of Montreal, the Bank of Nova Scotia, and the industry as a whole. NU is currently trading at a trailing 12-month price-to-earnings ratio of 20.51X, higher than the industry’s 9.08X. Bank of Montreal and Bank of Nova Scotia have price-to-earnings ratios of 11.58X and 9.77X, respectively.
Nu Holdings' Investment Considerations
NU’s digital-first and scalable business model reduces operational costs, thereby, boosting efficiency. This strategy has positioned the company as a prominent player within traditional banking. It has not only improved financial inclusion but also enhanced accessibility across markets. Nu Holdings has captured a fair share of Brazil’s traditional banking market on the back of its cost-effective structure and customer-centric model.
In the fourth quarter of 2024, NU witnessed a 22% year-over-year jump in active customers. This impressive growth can be attributed to the company’s digital-first strategy. Furthermore, the company is expanding its operations in Latin America, mainly in Mexico and Colombia, where adoption is on the rise. Nu Holdings is poised to grow further by tapping into uncharted territories.
The company’s long-term vision involves a global AI-driven digital banking model by which it can provide hundreds of millions of customers with access to financial products and services that have historically been reserved for a few. We expect this strategy to drive in customers, boosting its customer base, leading to an increase in its top line.
NU’s diversified revenue model enables it to mitigate risks and provides stability in economic uncertainties. Higher monetization of its platform and increased user engagement improved its top line in the fourth quarter of 2024, evidenced by 24.3% year-over-year growth.
Meanwhile, one should keep in mind that the company operates in a fiercely competitive market and is still far from capturing a significant portion of the market. This can certainly compel NU to invest more in technology and talent to stay ahead in the game. While the company may reap benefits in the long run, the difficulty in balancing growth and profitability may increase.
Verdict: Hold NU for Now
Nu Holdings' long-term growth strategy involves acquiring more customers utilizing its digital-first strategy and AI-led practices. The top line is expected to improve as the company expands into untapped markets. However, in a highly competitive environment, NU may be required to make large investments to capture a fair share of the market. This can certainly affect its ability to balance growth and profitability.
NU, despite being a fundamentally strong stock, has a premium valuation. Hence, a cautious approach should be taken by investors. We recommend investors hold on to the stock for now and wait for a better entry point that can emerge if the stock undergoes some correction.
Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report
