Goldman Sachs explains why it is bullish on Nu Holdings stock

Nu Holdings shares have fallen about 29% from a January high of $18.95 to roughly $13.43. The article characterizes the pullback as occurring despite an intact long-term growth thesis, citing customer-base expansion, strength in Brazil, and further Latin American growth initiatives in Mexico and Colombia.

Analysis

NU’s valuation is likely to remain governed less by customer-growth optics than by the quality of incremental credit revenue. The key near-term sensitivity is whether Brazilian revolving-credit and personal-loan cohorts continue to normalize without requiring materially higher provisions; a modest deterioration in cost of risk can overwhelm operating leverage in a consumer lender. Falling Brazilian policy rates are a double-edged sword: they can support household affordability and lower funding costs, but also compress asset yields and increase competition from incumbents such as Itau Unibanco (ITUB) and Banco Bradesco (BBD).

The non-obvious structural upside is that Mexico can alter the multiple only after it demonstrates monetization, not merely account acquisition. A successful transition from low-cost deposits and payments into secured or carefully underwritten credit would diversify NU away from Brazilian regulatory, FX and consumer-credit exposure; failure would leave the company valued as a higher-beta Brazilian lender rather than a regional platform. Over the next 1-3 months, earnings revisions, delinquency/vintage disclosures, net interest margin after risk, and Brazil real volatility should drive the shares more than user metrics. Over 6-18 months, the decisive catalyst is evidence that newer-market contribution margins are improving without a step-up in customer-acquisition expense.

Consensus may be treating the drawdown as either a simple entry point or a broad emerging-market risk-off event. The more useful framing is a credit-cycle test: NU deserves multiple expansion only if growth in interest-earning balances is accompanied by stable risk-adjusted margins and declining funding dependence. This thesis is falsified by two consecutive quarters of rising provision intensity, weaker contribution margin, or guidance implying growth must be purchased through higher incentives; conversely, stable credit metrics through a softer Brazilian consumer backdrop would make the current skepticism constructive.

Key Decisions for Investors

• Keep NU on a conditional long watchlist rather than buying solely on price weakness; initiate only after the next results confirm stable or improving cost of risk and risk-adjusted NIM. Target a 6-12 month position sized for high Brazil FX/consumer-credit beta; exit if management guides to accelerating credit losses or materially higher acquisition spend.
• For investors requiring immediate exposure, use a staged long NU position over the next 1-3 months, with half-size before earnings and the balance only after cohort/vintage data validate underwriting. The favorable case is multiple recovery from de-risked credit concerns; downside remains meaningful if provisions rise, so define a thesis stop around a post-results break below the pre-earnings low.
• Express the cleaner regional-fintech thesis as long NU / short ITUB or BBD only if NU demonstrates superior deposit growth and stable loss rates at earnings. This isolates part of Brazil macro and rate exposure, but abandon the pair if incumbent banks regain pricing discipline or NU’s credit costs widen relative to the banks.
• Monitor USD/BRL, Brazilian delinquency data, and Banco Central rate decisions as risk triggers. A sharp BRL depreciation or a faster-than-expected easing cycle without offsetting loan growth would pressure reported dollar returns and lending spreads, arguing against adding before fundamentals confirm.