Nu Holdings (NYSE: NU) shares experienced a decline on Friday, moving counter to a broader U.S. market rally, as renewed focus on credit quality weighed on investor sentiment. The stock fell 2.3% to $12.86, trading in a range of $12.75 to $13.26, and now sits roughly one-third below its 52-week high of $18.98.
Analyst Actions
Bank of America analyst Mario Pierry lowered his price target on Nubank to $16 from $17, maintaining a hold rating. The move follows what BofA described as a disappointing quarter for the second consecutive period. The firm also reduced its 2026 and 2027 Brazilian real net income estimates by 6% and 9%, respectively.
UBS analyst Thiago Batista also trimmed his target, cutting it to $16.90 from $18.10 on May 20, though he kept a buy rating. The mixed signals from analysts—lower targets but not a wholesale downgrade—highlight the ongoing debate about the company's prospects following its first-quarter earnings report.
Earnings Highlights
Nu reported record first-quarter net income of $871.4 million on IFRS revenue of $4.97 billion, according to a May 14 SEC filing. Managerial revenue, a company-adjusted measure, reached $5.32 billion. The record profit, however, was overshadowed by a sharp increase in credit loss allowances, which rose to $1.79 billion.
The company's credit metrics showed signs of strain. The 15-90 day non-performing loan (NPL) ratio increased to 5.0%, while the 90-plus-day NPL ratio stood at 6.5%. Risk-adjusted net interest margin (NIM) fell to 9.5%, reflecting higher provisions for potential loan losses.
Management Commentary
Management pushed back against concerns that the credit portfolio was deteriorating. CFO Guilherme Marques do Lago told investors that the first-quarter delinquency figures were "consistent with that seasonal pattern" and evidence that "pricing discipline is working well." CEO David Vélez emphasized the company's scale and technology, noting that Nu now serves over 135 million customers globally, including more than 115 million in Brazil and over 15 million in Mexico. He described the company as "rebuilding banking around AI."
Market Context
The decline occurred despite a strong session for U.S. equities. The S&P 500 was on track for its eighth consecutive weekly gain, while the Dow Jones Industrial Average hit an intraday record high. Trading volumes were expected to be thinner ahead of the Memorial Day holiday, with U.S. markets closed on Monday, May 25.
Nu's stock has undergone a significant reset from its 52-week high of $18.98, reflecting investor caution about the fintech's growth trajectory amid rising credit costs. The company's performance is now being judged less on headline growth and more on its ability to sustain strong returns on lending without a fresh spike in bad loans.
Outlook
The key risk for Nu remains the trajectory of Brazilian consumer credit. If early delinquencies do not moderate after seasonal effects, higher provisions could continue to pressure earnings forecasts, making it harder for investors to focus on the company's customer growth, expansion in Mexico, or AI-driven underwriting improvements. The next few trading sessions, shortened by the U.S. holiday, may provide limited clarity on these issues.
