Nu Holdings: Q1 Revenue Surges 42% but Credit Provisions Spook Market, DeepValue Report Sees Opportunity on Seasonality

What happened

Nu Holdings reported Q1 2026 revenue of $5.3 billion, up 42% year-over-year, but the stock dipped after the print due to a 33% sequential rise in credit-loss provisions to $1.79 billion and a 100 bps drop in risk-adjusted NIM to 9.5%. Management and a Seeking Alpha article attribute the credit spike to seasonality and portfolio growth, noting stable NPL ratios, while the DeepValue report flags the 15–90 day NPL increase to 5.0% from 4.1% as a key monitorable. At $12.3, Nu trades at 20.6x P/E and 5.2x P/B against a 29% ROE, and the DeepValue report rates it a POTENTIAL BUY with a base case of $14, but also outlines a bear case of $9 if credit stress proves structural. The stock's next leg depends on whether early-stage delinquencies mean-revert by Q3 and whether FY26 efficiency stays near management's ~20% target, with the 17.6% Q1 efficiency ratio seen as non-repeatable. The market's skepticism is pricing in investment-year noise, but the thesis requires tight monitoring of credit costs through Q2 and Q3 to confirm the seasonal narrative.

Implication

If early delinquencies revert and efficiency holds ~20%, Nu's ~30% growth and high ROE should command a higher multiple, driving re-rating toward $14–17. Persistent credit deterioration or efficiency slippage would break the thesis, forcing a de-rate to single-digit P/E.

Thesis delta

The Q1 credit noise is consistent with DeepValue's expectations of seasonal volatility, not a fundamental shift; the investment case now hinges on Q2/Q3 credit data to confirm the seasonal narrative rather than on any new catalyst. The bear case remains alive but the article's push that 'market skepticism is overdone' aligns with the base-case view of mean-reversion.