Today's significant drop in Nu Stock's value is causing concern.
Nu's Shaky Friday
Friday's trade saw Nu (NU -17.43%) shares plummeting. By 11:30 a.m. ET, the fintech giant's stock had dropped a staggering 15.2%, and it had even dipped as low as 17.2% earlier in the day.
The slide followed the release of Nu's Q4 results after market close the previous day. Although earnings matched the Wall Street consensus, revenue fell short - and investors weren't pleased with the company's future forecasts either.
Nu's Q4 Sales Letdown
For Q4, Nu reported non-GAAP (adjusted) earnings of $0.12 per share on revenue of $2.99 billion. Although the earnings scorecard checked out, the revenue figure missed the Wall Street target, with analysts anticipating sales of $3.17 billion.
Revenue still showed a robust 24.6% year-over-year increase, and the company wrapped up the quarter with 114.2 million customers, an impressive 22% year-over-year uptick. Yet, investors might perceive some potential worrisome signals beyond this sales shortfall. Despite a climb in purchase volume to $32.2 billion from $30.9 billion in Q3 and surpassing expectations, revenue still fell short of the target. This hints at the possible softening of the company's pricing power.
What's in Store for Nu?
Nu CEO David Vélez announced 2025 will be another year full of investment for the company. Continuing to invest heavily in infrastructure and customer expansion is excellent news for the business's long-term vision, but some investors might be disenchanted with the implications this could have on this year's profit outlook.
Nu is prioritizing accelerating adoption for its services in Brazil, Mexico, and Colombia, which could in the short term impact profitability. On the flip side, the company has already scaled to an impressive size - and its Q4 report actually displayed solid performance in most sectors. For patient investors, today's sell-off could be an optimal opportunity to grab shares.
Enrichment Data:
- Revenue growth rate for Nu Holdings was lower than historical performance and some industry peers, despite efficient cost management.
- Asset quality and expansion could not sufficiently compensate for the revenue miss.
- Nu Holdings expanded its customer base in Q4 2024 (114.2 million globally) and its financial performance remained strong with impressive net income and adjusted net income figures.
- The stock's valuation is currently high, with expectations of strong revenue growth potentially introducing risks if earnings growth does not meet expectations. Investors may consider maintaining existing positions to capitalize on long-term growth prospects but may wish to wait for a possible pullback before entering new positions.
- Despite Nu's strong Q4 performance in terms of net income and adjusted net income, and a robust customer base growth, the revenue miss might have softened investors' perception of the company's pricing power, leading to selling off shares on Friday.
- Investors were probably not pleased with Nu's future forecasts, as the revenue figure missed expectations and the slide in shares continued on Friday, despite the company's plans to invest heavily in infrastructure and customer expansion in 2025.
- As Nu continues to invest in infrastructure and customer expansion, some investors might be disenchanted with the implications this could have on the profit outlook in 2025, leading to Friday's sell-off.
- With Nu's stock value currently high, and expectations of strong revenue growth, patient investors might see the sell-off on Friday as an optimal opportunity to invest, as they believe in the company's long-term growth prospects.
