$Nu Holdings Ltd.(NU)$ is one of my highest conviction stocks for the next 10 years.
Revenues are skyrocketing on neutral currency basis, cost to serve keeps decreasing and it has just acquired a full bank license in Mexico.
Here is why NU can easily make 2x from here: 🧵
1/ Members are skyrocketing.
People just love NU, it's the easiest and most effective way to access financial products in its operating markets.
It's about to reach 120 million customers.
And it just posted some solid numbers...
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2/ This company grew revenues 50% annually in the last 5 years.
The growth seemed to slow down in the Q4 2024, yet this was only because Brazilian Real took a nose dive against the USD.
Now that Real recovered from its dips and stabilized, growth is set to accelerate.
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3/ We started to see this last quarter.
It grew revenues 40% on neutral currency basis while it grew 19% on USD basis.
These are amazing numbers for a company that is already the largest digital bank in the world.
Details indicate an even stronger performance.
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4/ Monthly revenue per active customer is skyrocketing while the cost to serve collapses.
This company already had under $1 cost to serve last quarter, now it further decreased to $0.7, indicating operational efficiency.
Monthly ARPAC has reached nearly $26 for oldest cohorts, yet there is still so much room for growth given that traditional banks have monthly ARPAC of around $100.
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5/ Deposits are skyrocketing.
Total deposits grew 48% on currency neutral basis.
While Brazil deposits grew around 10%, Mexico deposits reached doubled and Colombia reached $1.8 billion.
Yet, Mexico is just beginning...
Let me explain:
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6/ Mexico is a huge growth market for NU.
50% of the adult population in Mexico is either unbanked or underbanked.
Credit card penetration rate is nearly 1/3 of Brazil.
Hear from NU Co-founder why Mexico is a great opportunity:
7/ And NU is heavily investing in Mexico.
They have just acquired a full banking license in Mexico.
It can now offer payroll accounts and high value loans, expanding product portfolio and becoming more inclusive.
As deposit limits will also increase with banking license, we'll likely see Mexico deposits skyrocket.
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8/ Skyrocketing deposits will result in increasing net interest margins (NIM) as the cost of capital collapses.
They are following the Brazil blueprint in Mexico and Colombia too.
They are currently subsidizing loans to create the customer base. Once they reach the desired liquidity levels, NIM starts to take off.
Once this happens in Mexico, profitability will go off the roof.
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9/ And there are still ample opportunities for expansion...
It's only active in Brazil, Mexico and Colombia. They together make up 60% of Latin America's GDP.
It can easily expand to Chile, Argentina and Peru that together make up 15% of the GDP.
It can easily serve 75% of the continents economy by operating just in 6 markets.
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10/ Valuation is fair.
Even if we assume just 20% revenue growth after loss adjustments, it'll generate $14 billion adjusted revenue in 2030.
Even if its net margin doesn't expand anymore, at 32%, it'll generate $4.48 billion in 2030.
At 25 times earnings, it'll be valued at $112 billion, roughly 2x of today's valuation.
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