Nu Holdings' Revenue Durability Spotlighted Amid Lingering High Valuation and Credit Risks

What happened

A new Zacks article emphasizes Nu Holdings' growing revenue durability, driven by deeper multi-product use, which is reshaping its growth narrative as recurring income rises despite macroeconomic swings. This positive spin suggests that Nu's business model is becoming more resilient, potentially insulating it from economic volatility. However, the DeepValue master report maintains a 'POTENTIAL SELL' stance, citing elevated valuation multiples (~32x P/E, ~7.6x P/B), a DCF intrinsic value far below the current price, and significant exposure to unsecured credit in volatile Latin American economies. While the article portrays operational strength, it may overlook the underlying credit cycle risks and regulatory uncertainties highlighted in Nu's filings, which could undermine revenue stability. Ultimately, this news reinforces the importance of critical analysis but does not change the fundamental investment concerns.

Implication

The news article highlights Nu's revenue durability from multi-product engagement, which could signal sustainable growth if proven through economic cycles. However, investors must critically assess whether this durability mitigates the core risks identified in the DeepValue report, such as volatile unsecured credit performance and regulatory headwinds in Latin America. Key implications include the need to monitor credit quality metrics like NPL 90+ ratios and ECL coverage, as any deterioration could swiftly erode profits and challenge the durability claim. At current valuations, the stock offers little margin of safety, making it vulnerable to downside from growth deceleration or credit shocks. Therefore, while the news is optimistic, it should not distract from the prudent approach of waiting for improved risk-reward or concrete evidence of through-cycle resilience before considering investment.

Thesis delta

The DeepValue thesis remains unchanged as a 'POTENTIAL SELL' due to high valuation and unaddressed credit cycle risks. The news on revenue durability, while positive, does not materially shift the investment stance, as it overlooks the underlying macroeconomic and regulatory vulnerabilities. No delta in the thesis is warranted, and investors should continue to prioritize caution.