Nu Holdings (NU Stock): Digital Bank’s 17% Drop Follows Revenue Miss and Margin Pressure

Nu Holdings (NU Stock): Digital Bank’s 17% Drop Follows Revenue Miss and Margin Pressure

TLDR:

• Nu Holdings reported Q4 earnings matching expectations at $0.12 per share, but revenue of $2.99B missed analysts’ target of $3.17B
• Customer base grew 22% year-over-year to 114.2 million, with strong growth in Mexico (10M customers) and Colombia (2.5M)
• Full-year 2024 revenue reached $11.5B (58% YoY growth) with net income doubling to $2B
• Net interest margins declined 70 basis points to 17.7%, pressured by forex and shift to lower-risk loans
• Stock plunged approximately 15-17% following the earnings announcement and guidance for increased investment spending in 2025

Digital banking company Nu Holdings (NYSE: NU) saw its stock price plummet by as much as 17.2% in Friday trading following the release of its fourth-quarter earnings report, which revealed mixed results and sparked investor concerns about future growth prospects.

The fintech giant reported fourth-quarter revenue of $2.99 billion, falling short of Wall Street’s expected $3.17 billion. While the company matched earnings predictions with non-GAAP earnings of $0.12 per share, the revenue miss and guidance for increased investment spending in 2025 triggered a sharp market reaction.

Despite the market’s negative response, Nu’s customer base continued to show robust growth. The company reported 114.2 million customers at the end of 2024, representing a 22% increase from the previous year. This expansion included notable gains in key markets, with Mexico surpassing 10 million customers and Colombia reaching 2.5 million.

Purchase volume showed positive momentum, rising to $32.2 billion in the fourth quarter from $30.9 billion in the third quarter, exceeding market expectations. However, this increase in transaction volume did not translate into proportional revenue growth, raising questions about the company’s pricing power.

For the full year 2024, Nu posted impressive growth metrics, with total revenue reaching $11.5 billion, marking a 58% increase from 2023. The company’s net income nearly doubled to $2 billion, demonstrating its ability to scale profitably despite competitive pressures.

A key concern emerging from the earnings report was the decline in net interest margins (NIM), which fell by 70 basis points to 17.7%. This compression was attributed to foreign exchange fluctuations and the company’s strategic shift toward lower-risk loans.

Lending Portfolio Growth

The company’s secured lending portfolio demonstrated exceptional growth, increasing by 615% year-over-year. This rapid expansion in secured lending reflects Nu’s efforts to diversify its product offerings and build a more stable revenue base.

Monthly activity rates showed a slight decline to 83.1%, which the company attributed to its rapid expansion into newer markets where customer engagement typically starts lower and builds over time.

Nu has achieved a notable milestone in Brazil, becoming the country’s third-largest financial institution by customer count. The company continues to strengthen its ecosystem through new services like NuTravel and NuCel, indicating ongoing efforts to diversify revenue streams.

CEO David Vélez announced that 2025 would be “another big investment year” for the company, focusing on expanding infrastructure and customer base in Brazilian, Mexican, and Colombian markets. This strategic decision, while potentially beneficial for long-term growth, may impact near-term profitability.

The company maintains a strong financial position with a 29% annualized return on equity, placing it among the most profitable fintech companies globally. Asset quality metrics have shown improvement, supported by a disciplined cost structure.

Revenue Growth

Revenue growth in the fourth quarter slowed to 24.6% year-over-year, marking the lowest growth rate in recent years. This deceleration, combined with margin pressures, has contributed to investor concerns about the sustainability of Nu’s high-growth trajectory.

The market reaction reflects growing scrutiny of Nu’s ability to balance rapid expansion with profitability. While the company continues to add customers at a brisk pace, investors appear increasingly focused on margins and revenue per customer metrics.

Currency fluctuations remain a challenge for Nu, as foreign exchange movements impact the company’s financial results and create additional complexity in managing international operations.

The latest quarterly results show Nu’s success in building scale and market presence, but also highlight the challenges of maintaining growth rates while adapting to changing market conditions and customer preferences.

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