NU's Six Months Consolidation: Should You Buy, Hold, or Sell?

Nu Holdings Ltd. NU stock has been consolidating over the past six months, a sharp contrast to the industry’s 25% growth.

This analysis will dive into the company’s recent performance and explore whether current market conditions and price levels present a buying opportunity.

NU Is Scaling Fast, and Monetizing Even Faster

NU isn’t just expanding, it’s accelerating, and at a pace few fintechs can match. In the first quarter of 2025 alone, the digital banking leader onboarded 4.3 million new customers, lifting its total to 118.6 million, a 19% year-over-year surge. With nearly 100 million monthly active users, NU is proving it can scale massively without losing sight of revenue potential.

What makes this growth even more compelling is NU’s ability to monetize effectively amid rapid expansion. Average revenues per active customer came in at $11.2, only marginally down from last year’s $11.4. It’s a clear sign that the company is maintaining strong unit economics, even as it moves into new markets and deepens penetration in existing ones.

In an industry where many fintechs pursue growth at the expense of profitability, NU stands apart. The company is showing that customer acquisition and financial discipline can go hand in hand. Its revenues rose 19% year over year in the first quarter, driven by high engagement and diversified monetization streams, including lending, interchange fees and marketplace services.

NU’s digital-first, scalable model is built for efficiency. Its flagship platform, NuBank, has not only disrupted the dominance of traditional banks, particularly in Brazil, but also earned a reputation as one of Latin America’s most trusted financial brands. With ongoing expansion in Mexico and Colombia, NU is positioning itself as a regional powerhouse. Its ability to offer low-cost, user-friendly financial services is unlocking access across underserved markets and fueling further growth.

While Nu continues to surge ahead in Latin America, U.S.-based peers like SoFi Technologies SOFI and Block XYZ are taking different routes to growth. SoFi is focusing on deepening customer relationships through bundled financial services like lending, investing and banking. Its strategy seems to emphasize lifetime value over rapid user expansion. Meanwhile, Block is sharpening its dual ecosystem approach, serving both individual users through Cash App and small businesses via Square.

While both SoFi and Block are evolving steadily, Nu’s pace and scale of customer acquisition in emerging markets underscore a distinct momentum that sets it apart in the global fintech landscape.

NU’s Strong Returns on Capital

Return on equity (ROE), a measure of profitability, reflects how effectively a company uses its shareholders' investments to generate earnings. NU’s trailing 12-month ROE is 30.8% compared with the industry’s average of 11.4%.

NU has also shown strong returns on invested capital (ROIC), with a trailing 12-month ROIC of 14.5%, well above the industry average of 3.4%.

NU Looks Pricey

NU stock appears significantly overvalued compared to industry peers, currently trading at 18.62 times forward earnings, almost double the sector's average of 9.33 times. This substantial premium reflects the market’s optimism about NU’s growth potential, driven by its innovative fintech model, expanding customer base and strong revenue trajectory. However, such a lofty valuation also introduces risks, as any shortfall in earnings or slower-than-expected growth could lead to a sharp correction.

Inflation and Currency Risks Loom Over NU in Latin America

Brazil is currently grappling with an inflation rate of around 5%, notably higher than that of the United States, while its currency has steadily weakened against the U.S. dollar since early 2024. Although Brazil isn’t experiencing hyperinflation, the persistent above-average inflation remains a key concern. More broadly, inflationary volatility is a recurring theme in several Latin American markets where NU Holdings operates. Even relatively developed economies like Argentina have faced severe inflation, prompting Nubank to make a swift exit from that market due to economic instability. These macroeconomic headwinds, including potential foreign exchange losses, pose a real risk to Nubank’s profitability and could weigh on investor sentiment moving forward.

Strong Fundamentals, But Headwinds Call for Patience

NU has shown exceptional customer and revenue growth, strong returns on capital, and a clear lead in Latin America's fintech space. However, the stock has underperformed the broader industry over the past six months and now trades at a steep valuation premium. In addition to persistent inflation and currency volatility in key markets, the near-term upside looks limited. Despite solid fundamentals, these risks and the stock’s consolidation suggest caution. For now, NU may best suit a “wait and see” approach. Long-term potential remains intact, but current price levels and macro headwinds warrant patience over aggressive buying.

NU currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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This article originally published on Zacks Investment Research (zacks.com).

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