Nu Holdings Ltd’s (NYSE:NU) foothold in Brazil gives the company a "scaled and profitable customer base," which can fuel growth in other markets, according to Needham.
The Nu Holdings Analyst: Analyst Kyle Peterson initiated coverage with a Buy rating and price target of $17.
The Nu Holdings Thesis: The company operates as a neobank and digital lending platform, with a strong foothold in Brazil, serving around 60% of the country’s adult population, Peterson said in the initiation note.
Check out other analyst stock ratings.
Around 85% of Nu Holdings’ total revenues are generated through interest earned on products such as credit cards, personal loans, and secured payroll loans, while the remainder comes from fee sources such as interchange, late fees, and insurance commissions, he added.
Spreading Across LatAm: The company now has more than $42 billion in deposits across Brazil, Colombia, and Mexico, the analyst stated. By expanding its presence in Latin America, Nu Holdings has emerged as the largest global neobank with more than 135 million customers, he further said.
Growth Strategy: The company’s core markets are characterized by a large number of unbanked customers and a low credit card penetration rate, Peterson noted. This has resulted in Nu Holdings’ "low and grow" strategy, which offers customers a low credit limit and builds this over time as they prove to be creditworthy, the analyst explained.
"We believe this will help NU continue to generate impressive growth in the coming years, as the company continues to add new customers at a rapid clip (NU added over 16 million customers in the LTM period), while also expanding credit lines and monetization across the existing customer base," he further wrote.
US Expansion: The company has plans of expanding to the U.S. and an official launch is likely within the next 12 months, Peterson stated. This could "unlock substantial shareholder value by adding another growth vector while also increasing exposure to a developed market," he added.
NU Price Action: Nu Holdings shares were up 5.30% at $13.12 at the time of publication on Friday, according to Benzinga Pro data.
Photo: Diego Thomazini via Shutterstock
Login to comment