Nu Holdings Ltd. shares edged higher in early New York trading on Thursday, recovering from recent losses as the market digested a price target reduction from UBS. The stock hovered near $12.79, reflecting a 4.1% gain from the previous close, yet remains down 23.6% year-to-date in 2026.
UBS Adjusts Price Target
On Wednesday, UBS lowered its price target for Nu Holdings to $16.90 from $18.10, while reiterating a Buy rating. The revised target still implies approximately 32% upside from the current price level, according to Benzinga's analyst tracker. This mixed signal comes as investors weigh the company's strong revenue growth against rising credit provisions.
Record First-Quarter Results
Nu Holdings reported record first-quarter revenue exceeding $5 billion for the first time, with net income reaching $871 million and a return on equity of 29%. Founder and CEO David Vélez highlighted the company's milestone of more than 135 million customers, emphasizing that artificial intelligence is a core priority. "We are not adding AI to banking; we are rebuilding banking around AI," Vélez stated.
Credit Quality Concerns
The primary pressure point remains credit quality. The credit portfolio expanded to $37.2 billion at quarter-end, up 40% year-over-year on a foreign-exchange-neutral basis. However, a higher credit-loss allowance pushed the risk-adjusted net interest margin down by 100 basis points sequentially to 9.5%. CFO Guilherme Lago pushed back against concerns that the reserve build signals a worsening credit cycle, stating, "The provisions that we have been doing over the past quarters do not reflect any directional outlook that we have on the credit cycle." He added that Nu underwrites loans assuming "the future will be worse than the past."
Seasonal Factors and Competitive Landscape
JPMorgan analyst Yuri Fernandes noted that first-quarter provisions are typically seasonal, a view Lago confirmed, indicating that risk-adjusted margins should revert toward late-2025 levels once seasonality fades. Nu's competitive position strengthened as it surpassed 115 million customers in Brazil, making it the largest private financial institution in the country. In Mexico, the customer base exceeded 15 million, reaching break-even. This expansion puts Nu in direct competition with traditional Brazilian banks such as Itaú Unibanco and Banco Bradesco.
Market Outlook
Despite the positive earnings report, investor concerns persist around asset quality and international expansion. CFO Lago noted that questions continue to cluster around these areas, with some skepticism regarding the U.S. push. For Thursday's session, the key test is whether buyers view the UBS target cut as already priced in or as a reason to fade the post-earnings bounce. The stock's performance will depend on whether early-stage delinquencies rise, provisions remain elevated beyond the first quarter, or investor caution grows regarding Nu's U.S. expansion plans.
