Shares of Nu Holdings (NYSE: NU) fell 3.9% on Friday, closing at $14.30 and erasing approximately $2.8 billion in market capitalization, as investor concerns over Federal Reserve policy tempered enthusiasm for the company's record-breaking quarterly results. Trading volume reached 79.14 million shares, modestly above the 65-day average.
The pullback came despite Nu's second-quarter net profit surging to an all-time high of $1.06 billion, up 49% year-over-year and surpassing analyst expectations of $967.2 million. Revenue climbed 39% to $5.88 billion, also beating the Visible Alpha consensus of $5.60 billion. The earnings report, released earlier in the week, had initially driven shares up 9.5% before Friday's reversal.
Macro Pressures Weigh
No new company-specific news drove the decline. Instead, the drop mirrored a broader market reaction to remarks from Federal Reserve Chair Kevin Warsh, who reiterated concerns about persistent inflation. The U.S. dollar strengthened 0.66% against the Brazilian real, putting additional pressure on emerging market assets, including Brazilian equities.
"The market is clearly focusing on the macro environment rather than the strong operational results," said a São Paulo-based analyst. "Fed uncertainty is creating volatility across the region."
Strong Fundamentals, Lingering Credit Risks
Nu's risk-adjusted net interest margin improved to 12.4% from 9.9% a year earlier, a 250-basis-point expansion that Chief Financial Officer Rob Livingston described as sustainable. The company also added approximately four million new customers during the quarter, bringing its total client base to 139 million, with average monthly revenue per active customer approaching $17.
However, credit quality remains a focal point. The cost of credit fell 9% quarter-over-quarter to $1.69 billion but was still 60% higher than the same period last year. Early-stage delinquencies (15-90 days) improved to 4.8%, down 16 basis points, while loans past due more than 90 days rose 35 basis points to 6.9%. Nu attributed the late-stage increase to seasonal migration from earlier delinquency buckets.
Valuation and Analyst Outlook
At Friday's close, Nu traded at roughly 19.5 times trailing earnings, below its recent peak but still reflecting high growth expectations across Brazil, Mexico, and Colombia. Wall Street remains broadly optimistic: 18 of 22 analysts rate the stock a buy, three recommend holding, and one suggests selling. The consensus price target stands at $18.78, implying about 31% upside, though targets range from $10 to $23.
Key risks include funding costs, currency fluctuations—particularly a stronger dollar reducing converted earnings—and the pace of credit normalization. If unsecured lending accelerates, late-stage delinquencies could rise further before revenue benefits materialize.
For investors, the benchmark is clear: Nu must sustain a risk-adjusted margin near 12% while integrating its global expansion. If achieved, Friday's macro-driven decline could allow earnings to catch up with valuation, presenting a potential opportunity for long-term holders.
