Shares of the leading provider of digital financial services platforms, Nu Holdings (New York Stock Exchange: NOW), fell more than 55% in the last year. Given the significant decline, Nu Holdings is now a penny values. While NU shares have lost substantial value, Wall Street analysts maintain a bullish outlook and see solid upside potential based on analysts’ average price target.
NU is a buy right now?
Nu Holdings focuses primarily on the Brazilian, Mexican and Colombian markets. Given the short-term macroeconomic headwinds, mainly from higher interest rates, NU has seen a moderation in the growth rate of its personal loans.
It is worth noting that NU personal loans increased 400% in the first quarter. Meanwhile, the growth rate moderated to 250% and 111% in the second and third quarters, respectively. In addition, personal loans decreased sequentially in the third quarter. Additionally, economic challenges have led to an increase in delinquency rates.
The challenges of a difficult macro environment and higher interest rates continue to constrain NU’s upside potential in the near term. However, its ability to expand its client base and drive interest in its earning book provides a solid platform for long-term growth.
Its growing active customer base, higher revenue per customer, and low platform operating costs bodes well for profitability long-term. In addition, management expects net interest margins to improve as loans continue to grow faster than deposits and the cost of financing optimizes.
NU stocks have a Strong Buy consensus rating on TipRanks based on five buy and one sell recommendation. In the meantime, NU target price of $7.35 implies an upside potential of 101.92%.
Bottom line
Near-term macroeconomic headwinds could keep NU stocks volatile in the near term. However, its growing client base, expansion of its loan portfolio and focus on boosting operating leverage will likely support its share price over the long term. While Nu Holdings is an attractive long-term penny stock, investors can use TipRanks’ Penny Stock Screener to find more of these companies that are more likely to generate strong returns.
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