Nu Holdings (NU) shares edged higher on Wednesday morning, gaining 1.3% to $12.04, as investors assessed the implications of a newly authorized $1 billion share repurchase program. The stock opened lower at $11.77 before recovering, offering some relief after a prolonged downturn that has seen the shares lose 30.5% over the past six months and 22% in the last three months alone.
Buyback Program Details
In a June 4 SEC filing, Nu disclosed that its board had approved a plan to repurchase up to $1 billion in Class A shares over a one-year period, running through June 3, 2027. The buyback is intended to be funded from retained earnings and future cash flows, signaling the company's confidence in its financial position. However, the filing also noted that the repurchase plan does not commit to any specific amount and could be modified, suspended, or terminated at any time.
Credit Quality and Financial Performance
Nu's first-quarter results painted a mixed picture. Revenue surged 42% year-over-year to $5.32 billion on a foreign exchange-neutral basis, while net income rose 41% to $871 million, yielding a return on equity of 29%. However, credit loss allowances jumped 33% from the prior quarter to $1.79 billion, and the risk-adjusted net interest margin contracted to 9.5% from 10.5% in Q4. The 15-to-90-day non-performing loan ratio rose to 5.0% from 4.1%, which the company attributed to normal first-quarter seasonality and its expansion into higher-risk segments.
CFO Transition and Analyst Reactions
On June 1, Nu announced that Rob Livingston, former CFO of Visa for North America, would take over as chief financial officer on July 13, replacing Guilherme Lago, who will serve as a special adviser until August 31. The transition prompted analyst downgrades. BofA Securities lowered its rating to Underperform from Neutral and slashed its price target to $10 from $16, citing the timing of the change as a source of uncertainty amid a tougher credit cycle in Brazil. Susquehanna also downgraded Nu to Neutral from Positive.
Market Consensus and Outlook
Despite the downgrades, the broader analyst consensus remains bullish, with 21 analysts maintaining a mean Buy rating and an average price target of $18.39, though targets range from $10 to well above current levels. CEO David Vélez has emphasized the company's focus on artificial intelligence, stating, "We are not adding AI to banking, we are rebuilding banking around AI." Nu's AI Private Banker feature already boasts over 15 million monthly active users, and its proprietary NuFormer models are being used for credit card and unsecured lending decisions in Brazil and Mexico.
Investors now face a critical juncture. The buyback could provide near-term support, but rising credit costs, margin compression, and the CFO transition introduce significant uncertainty. The next quarterly credit update will be closely watched to determine whether the uptick in early-stage delinquencies is a seasonal blip or the start of a more concerning trend. With shares trading near $12, the market is pricing in a narrow path for the company to execute on its growth ambitions while managing credit risks effectively.
