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On Tuesday, JPMorgan analyst Yuri Fernandes revised the rating for Nu Holdings (Nubank) (NYSE:NU) stock, elevating it from Neutral to Overweight, although the price target was adjusted downward to $13.00 from the previous $14.00. The digital bank, currently valued at $46.8 billion, has seen its shares decline nearly 28% over the past six months. According to InvestingPro analysis, the stock appears undervalued based on its Fair Value model, suggesting potential upside from current levels. Fernandes highlighted that the recent market downturn presents an attractive opportunity for investors to buy into Nubank, despite JPMorgan's projections being 5-10% lower than the consensus estimates. JPMorgan estimates Nubank's net income for the years 2025-2026 to be between $2.4 billion and $3.2 billion, compared to the Bloomberg consensus of $2.6 billion to $3.6 billion.
According to Fernandes, even with conservative estimates, Nubank is expected to grow its earnings by more than 30% over the next three years, a rate that is challenging to find elsewhere. This growth trajectory is supported by the company's impressive 48.7% revenue growth in the last twelve months. InvestingPro data reveals 7 additional key insights about Nubank's growth potential and financial health, available to subscribers. The analysis suggests that if Brazil emerges as a relative victor in the global trade war, Nubank could stand to gain significantly as a preferred choice for global and growth investors. A weakening U.S. dollar and the potential for lower global interest rates are also seen as potential benefits for the company.
Fernandes praised Nubank for its execution and management, noting that the company's performance exceeded JPMorgan's initial public offering (IPO) expectations for 2024 earnings by five times. The analyst also pointed out Nubank's competitive cost advantages in Brazil's retail banking sector and the large market available for the company to tap into.
While anticipating a challenging year in 2025 due to a predicted slowdown in personal loans, Fernandes believes that the risks are already factored into Nubank's stock price following the global sell-off. In light of JPMorgan's estimates, which are below consensus, Nubank's stock is currently trading at 14.5 times its projected 2026 earnings. The company currently trades at a P/E ratio of 28.7, with analyst price targets ranging from $9 to $18.90. Investors should note that Nubank's next earnings report is scheduled for May 13, 2025. For comprehensive analysis and detailed valuation metrics, access Nubank's full Pro Research Report, available exclusively on InvestingPro. Fernandes concludes that this valuation is reasonable for a company with an expected earnings per share compound annual growth rate (EPS CAGR) of over 30% for the next three years.
In other recent news, Nu Holdings Ltd (BVMF:ROXO34). reported fourth-quarter revenue of $2.99 billion, surpassing analyst expectations of $2.74 billion. Despite this earnings beat, the company faced challenges with a declining net interest margin, which contracted by 70 basis points to 17.7% due to foreign exchange volatility and deposit strategies in Mexico and Colombia. Net income reached $552.6 million, marking an 85% increase year-over-year on a foreign exchange-neutral basis. The company also added 4.5 million customers in the fourth quarter, bringing its total customer base to 114.2 million, a 22% increase from the previous year.
In a strategic move, Nu Holdings announced a restructuring of its management team to enhance operational efficiency and customer focus. This includes the appointment of Livia Chanes as Brazil's Chief Executive Officer and Youssef Lahrech as President and COO. Citi analyst Ashwin Shirvaikar maintained a Sell rating on Nu Holdings, with a price target of $9.00, citing seasonal banking trends in Mexico and Nubank's growth patterns. Meanwhile, BofA Global Research analyst Mario Perry maintained a Neutral rating with a price target of $14.00, noting challenges in revenue generation and net interest margin contraction.
The company also reported a significant increase in its lending portfolio, which more than doubled year-over-year to $6.1 billion, and a 28% year-over-year expansion in its credit card portfolio to $14.6 billion. Total (EPA:TTEF) deposits grew 55% year-over-year to $28.9 billion, reflecting strong customer growth despite a dip in monthly activity rates.
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