NU Stock Declines 16% in Six Months: Should You Buy, Hold or Sell?

Core Viewpoint - Nu Holdings Ltd. (NU) has experienced a significant stock decline of nearly 16% over the past six months, contrasting sharply with the 23% growth in the industry, raising concerns about its near-term trajectory [1][3]. Company Performance - NU's stock performance is notably weaker compared to peers, with SoFi Technologies (SOFI) also down 19%, while Banco Santander (Brasil) S.A. (BSBR) has gained over 17% [2][3]. - The company added 4.3 million customers in Q1 2025, bringing its total global customer count to 118.6 million, indicating strong growth driven by its digital-first strategy [5]. - NU reported a 19% year-over-year revenue increase in Q1, showcasing robust revenue growth [8]. Financial Metrics - NU's trailing 12-month Return on Equity (ROE) stands at 30.8%, significantly higher than the industry average of 11.7% [9]. - The trailing 12-month Return on Invested Capital (ROIC) is 14.5%, well above the industry average of 3.1% [10]. - NU's stock is currently trading at 17.77 times forward earnings, more than double the sector's average of 8.58 times, indicating a high valuation premium [12]. Analyst Sentiment - Over the past 60 days, analyst estimates for NU have been revised downward, with two analysts downgrading projections for 2025 and one for 2026, reflecting growing concerns about mid-term growth [13][15]. - There have been no upward revisions during this period, suggesting a lack of renewed optimism among analysts [15]. Macroeconomic Environment - Brazil is facing an inflation rate of around 5%, higher than that of the U.S., and the currency has weakened against the U.S. dollar, posing risks to NU's profitability [16]. - Inflationary volatility is a recurring issue in several Latin American markets where NU operates, impacting investor sentiment [16]. Investment Recommendation - Given the stock's decline amid industry gains, macroeconomic headwinds, and high valuation, it may be prudent for investors to consider selling NU stock and reassessing at a more favorable price [17].