Nu Holdings Ltd. (NU) Stock Plunges: What Went Wrong?

Nu Holdings Ltd. (NU) stock took a nosedive on Friday, with shares dropping by 15.2% as of 11:30 a.m. ET. The fintech giant's share price had been down as much as 17.2% earlier in the session, following the release of its fourth-quarter results. While the company's earnings were in line with Wall Street's expectations, revenue fell short of the market's target, and investors were not pleased with the company's forward guidance.

Nu reported non-GAAP (adjusted) earnings of $0.12 per share on revenue of $2.99 billion. The profit for the period was in line with the average analyst estimate, but the average Wall Street estimate had called for sales of $3.17 billion in the period. Revenue was still up 24.6% year over year, and the company closed out the period with 114.2 million customers—up 22% year over year. However, despite purchase volume increasing to $32.2 billion from $30.9 billion in the third quarter and beating expectations, revenue fell short of the target. This could indicate that the company is seeing its pricing power soften a bit.



Nu CEO David Vélez highlighted the company's rapid adoption and expansion in its Brazilian, Mexican, and Colombian markets, which could weigh on profitability in the near term. The company is prioritizing driving rapid adoption for its services, which could lead to a slowdown in revenue growth and increased competition from Mercado Pago. Investors may be concerned about the company's ability to maintain its high growth rate and profitability in the face of these challenges.

Despite the revenue miss and concerns about future profitability, analysts maintain a "Buy" rating on average for NU stock, with a 12-month price target of $15.8, indicating a 46.03% upside. However, some analysts have expressed concerns about Nu's ability to maintain its high growth rate and profitability in the face of currency fluctuations and shifts in loan mix.

In conclusion, Nu Holdings' stock price decline on Friday was driven by a combination of factors, including a revenue miss, FX headwinds, controlled growth, and competition from Mercado Pago. While the company's customer base continues to grow, and its expansion into new markets remains a strategic priority, investors may be concerned about the company's ability to maintain its high growth rate and profitability in the face of these challenges. As Nu Holdings continues to execute on its customer-centric innovation and sustainable growth strategy, investors will be watching closely to see if the company can navigate these challenges and maintain its position as one of the world's largest and fastest-growing digital financial services platforms.