Why Nu Holdings' Stock Price Dropped 36.6% in May

cheerio
2022-06-06

What Happened

Nu Holdings(NU1.35%)had a rough month as its stock price plummeted 36.6% in May, according toS&P Global Market Intelligence.

The Brazil-based digital bank was well off the pace of theS&P 500, which was essentially flat in May, up 0.2%, and theNasdaq Composite, which fell 1.9% last month. Nu's stock price is down about 52% year to date, trading at around $4 per share.

So what

Nu Holdingsis the holding company of Nubank, a digital bank based in Brazil that serves that country, along with Mexico and Colombia. It is considered one of the largest digital banks in the world, with some 60 million customers.

The company went public last December at around $11 per share and it has been trending down ever since. The timing wasn't great, particularly forfintechs, as the Nasdaq Composite has dropped more than 20% since the start of the year. Inflation, rising interest rates, geopolitical risks, and an economic slowdown have all played a role.

The bank released its first-quarter earnings results on May 16 and the stockdropped below $4 per sharein the following days. The bank had a $45 million net loss, but that was down from $54 million the previous quarter.

Plus, its growth numbers were strong. The bank added 5.7 million customers year over year, increased deposits 94%, and generated a record $877 million in revenue, up 228% year over year -- beating analysts' estimates. Nu Holdings also increased its revenue per customer by 67%, lowered its average cost to serve customers by 30%, and maintained its low customer acquisition costs.

Now what

The growth numbers are impressive, and they have caught the eye of Warren Buffett, CEO ofBerkshire Hathaway, who is an investor in the company. Thecompetitive advantage Nubankhas over traditional banks in its markets is its low fees, which it can offer because of its relatively low overhead. It also offers easier access to banking services through its mobile app. Banks in the region typically have higher fees and more complex rules and bureaucracy to deal with.

Nubank has gained market share in its markets, but it is just scratching the surface of the markets it currently serves, not to mention the potential for massive expansion throughout Latin America. It's a stock to keep an eye on.$Nu Holdings Ltd.(NU)$

Disclaimer: Investing carries risk. This is not financial advice. The above content should not be regarded as an offer, recommendation, or solicitation on acquiring or disposing of any financial products, any associated discussions, comments, or posts by author or other users should not be considered as such either. It is solely for general information purpose only, which does not consider your own investment objectives, financial situations or needs. TTM assumes no responsibility or warranty for the accuracy and completeness of the information, investors should do their own research and may seek professional advice before investing.

Comments

  • Moonshot
    2022-06-10
    Moonshot
    Still got plenty of room to move downwards.
  • Sporeshare
    2022-06-09
    Sporeshare
    oversold ! good time to bounce up again
  • NismoCarboy
    2022-06-07
    NismoCarboy
    ok
  • Bsssg
    2022-06-06
    Bsssg
    .
  • RandyRoar
    2022-06-06
    RandyRoar
    💪🏼
  • sun2038
    2022-06-06
    sun2038
    👍
Leave a comment