Nu Holdings Ltd. shares moved higher Thursday after the company announced a $1 billion stock buyback plan. The stock traded at $12.11, up 4.0%, near midday in New York, outperforming the broader market as the SPY added 0.1% and the QQQ fell 0.8%. The rally appeared stock-specific rather than market-driven.
The buyback program, approved by Nu's board, covers up to $1 billion in Class A ordinary shares and runs from June 4, 2026 to June 3, 2027. Repurchases may occur on the open market, via derivatives, or in negotiated transactions. The company noted there is no minimum buyback requirement and it can modify or terminate the plan at any time. Nu plans to fund the repurchases using cash from retained and future earnings, while maintaining sufficient capital buffers for operations in Brazil, Mexico, Colombia, and the U.S.
Despite the buyback enthusiasm, analysts remain cautious. BofA Securities analyst Mario Pierry downgraded Nu to Underperform from Neutral and cut the price target to $10 from $16, citing the recent CFO transition as a key concern. Pierry noted that outgoing CFO Guilherme Lago was highly regarded by the market and that the timing of the change introduces uncertainty as Nu navigates a challenging credit environment in Brazil and expansion efforts in Mexico, Colombia, and the U.S.
Susquehanna analyst James Friedman also downgraded Nu to Neutral from Positive, lowering the target to $13 from $18. Friedman highlighted deteriorating operating margins, which fell 760 basis points to 19.2% in the first quarter, ahead of what he called an "anticipated investment cycle." The margin compression adds to the list of headwinds facing the digital banking pioneer.
Nu reported record revenue above $5 billion last quarter, with net income reaching $871 million and return on equity at 29%. However, credit-loss allowances surged 33% from the previous quarter to $1.79 billion, while the risk-adjusted net interest margin slipped to 9.5% from 10.5%. The mixed results gave both bulls and bears ammunition for their respective cases.
The buyback plan carries its own risks. Higher credit costs in Brazil, the CFO transition, and increased spending in the U.S. and Mexico could all prompt Nu to conserve cash rather than complete the repurchase. The board approval authorizes the buyback but does not constitute a firm commitment, leaving investors to weigh the company's ability to balance growth investments with shareholder returns.
Peer trading was relatively quiet, with Itaú Unibanco's U.S. shares edging up 1.4% and Santander Brasil adding 1.1%. Nu outperformed both traditional Brazilian banks as investors continued to assess its digital strategy against established players with deeper credit histories.
The market's focus now shifts to whether Nu can navigate the CFO change, manage credit costs, and execute on its expansion plans while following through on the buyback. The stock's gains suggest some confidence, but analyst caution underscores the challenges ahead.
