Nu Holdings Keeps Adding Customers at a Blistering Pace. Is the Fintech Still a Bargain?

Nu Holdings' stock is down about 25% this year and trades at 12x next year's earnings despite strong operating growth: customers rose to 135 million in Q1 2026, ARPAC increased to $16, and revenue/EPS are expected to grow at 31%/35% CAGRs from 2025 to 2028. The main headwinds are higher credit risk from expansion in Mexico and Colombia, persistent U.S. dollar pressure on reported earnings, and a valuation that still resembles a conventional bank. Offsetting that, Nu is pursuing bank charters and has launched a new $1.0 billion buyback.

Analysis

NU’s de-rating is less about growth deceleration than about the market reclassifying the business from a software-like compounder to a balance-sheet lender with EM FX exposure. That matters because the market will pay for customer acquisition and ARPAC expansion only if credit costs remain structurally below the incremental revenue yield; once the newer geographies contribute a larger share, the marginal dollar of growth can be worth materially less than the headline CAGR implies.

The second-order effect is that the company’s strongest operating leverage is being partially offset by funding and translation drag at the exact moment it needs cheap capital to scale Mexico and Colombia. If the U.S. dollar stays firm, reported EPS can lag local-currency operating performance for several quarters, which tends to keep the multiple compressed even if underlying unit economics are intact. In that setup, buybacks help per-share math only if they are not masking a rising cost of risk.

The near-term catalyst path is mostly binary and slow-moving: charter progress, credit normalization in newer markets, and FX. Full bank access in Mexico would be the cleanest rerating trigger because it attacks both funding cost and franchise durability, but the market will likely want two or three quarters of proof that credit losses are stabilizing before paying up. Until then, the stock can remain cheap longer than fundamentals alone suggest, especially if U.S. rates stay restrictive and EM currencies remain under pressure.

The consensus is likely underestimating how much of NU’s current valuation problem is cyclical rather than structural. If the dollar weakens and newer geographies mature, the earnings mix can re-rate sharply because the business still has unusually high incremental revenue per active customer and operating costs that have not scaled with size. The risk is that investors anchor on the 12x forward P/E as 'cheap' when in reality the market may be pricing a lower terminal ROE until credit and FX volatility visibly fade.

Key Decisions for Investors

• Avoid initiating a fresh long in NU before the next two quarterly prints; wait for evidence that credit losses in Mexico/Colombia are stabilizing and that reported EPS is no longer being mechanically suppressed by FX.
• For investors already long NU, consider a covered-call overlay into the next 60-90 days to monetize the low multiple while capping upside until bank-charter/credit catalysts become measurable.
• Pair trade: long NU / short a higher-quality U.S. regional bank ETF on a 6-12 month horizon only if you want exposure to rate cuts and a weaker dollar; otherwise, the cleaner relative value is short NU versus a profitable EM consumer-finance name with less FX drag.
• Speculative setup: buy medium-dated NU calls only on a confirmed USD downtrend or after a charter approval headline; the rerating could be fast, but the timing risk is high and the stock may otherwise grind sideways.
• If using buybacks as a signal, size NU smaller than a normal value trap because capital return here is more a confidence support than a thesis driver; require at least 1-2 quarters of improving credit metrics before adding aggressively.