Fintech
The ultimate fintech stock to buy now with $500
Fintech, or financial technology, has exploded as a global industry. The ability to move money electronically at the speed of light has changed the way the world does business and people consume. As in any industry, there are leaders and laggards. If you’re interested in a top fintech stock with vast opportunities, consider Nu Holdings (NYSE:NU).
New for you
US investors may not be familiar with Nu because it operates, under the NuBank banner, in Latin America. It is based in Brazil, where 54% of the adult population is enrolled, a number that continues to grow. It is now the fourth largest financial institution in Brazil. It has also recently entered Mexico and Colombia, where it is growing rapidly.
Nu is fully digital and offers an easy-to-use interface with low-cost products. It added 5.5 million new members in the first quarter of 2024 for a total of more than 99 million and has already surpassed 100 million since the close of the first quarter.
In addition to adding new customers, Nu generates high growth through cross-selling and upselling new products. It has expanded to include a wide range of services including bank accounts, loans, investment products and more. Average revenue per active customer (ARPAC) increased from $8.6 last year to $11.4 this year in the first quarter, an increase of 30%, and total revenue increased 64% year over year (neutral currency).
Image source: Nu Holdings.
Many ways to continue growing
While Nu continues to grow in Brazil, Mexico and Colombia represent even greater growth opportunities. It launched a high-interest savings account in Mexico last year, and membership has accelerated. Nu added 1.5 million new members in Mexico in the first quarter for a total of 6.6 million, surpassing 7 million at the time of reporting. It is also achieving important key performance indicators at a faster pace than Brazil at launch. It has $2.3 billion in deposits and 3.2 million credit cards, more than some of the country’s three major banks. It launched the savings account in Colombia earlier this year and now has 900,000 members.
It is also targeting new markets in Brazil as it moves upmarket to capture a wealthier population. It had the highest net promoter score of any bank for this market in 2023, and its goals for 2024 are to launch more products for this group, acquire members and increase engagement.
The all-important profit piece
Nu’s credit business is also taking off. Deposits increased 53% year-over-year to $24.3 billion, and total interest-bearing portfolio increased 86% to $9.7 billion. The higher overall credit portfolio is leading to a higher net interest margin, which increased 93% year over year in the first quarter; net interest margin increased from 15% to 19.5%.
The story continues
The cost of service per active customer increased from $0.8 last year to $0.9, a value that has remained stable over the past three quarters. Increasing ARPAC with only a minimal increase in cost of service, coupled with higher net interest income and margin, is creating solid profitability. Net income increased from $142 million in the first quarter of last year to $379 million in the first quarter of this year.
Nu’s efficiency ratio – which measures non-interest operating expenses as a percentage of revenue – has steadily declined over time, from 91.6% when it went public in 2021 to 32.1% in the first quarter of 2024.
Don’t miss this unstoppable stock
Nu shares rose 5% after the first-quarter report, and are up 45% in 2024 after more than doubling last year. It has several growth opportunities and is generating higher profits as it grows.
There aren’t many early-stage opportunities like this on the market, and it’s a rare growth stock that it is caught Warren Buffett’s attention. Nu shares trade on a one-year forward price-to-earnings ratio of 21, a bargain for a high-growth stock. Smart investors should consider buying today.
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Jennifer Saibil has positions in Nu Holdings. The Motley Fool recommends Nu Holdings. The Motley Fool has a disclosure policy.
The ultimate fintech stock to buy now with $500 was originally published by The Motley Fool