Nu's 2025 Stock Surge Highlights Growth but DeepValue Warns of Overvaluation

What happened

Nu Holdings stock jumped 61.6% in 2025, driven by rapid expansion in Mexico and substantial profitability, as highlighted in a Motley Fool article. However, the DeepValue master report rates the stock 'WAIT' due to a rich valuation of ~33x P/E and ~8x P/B, which already discounts high growth and ROE. Key risks include exposure to Brazilian macro volatility, an unsecured loan portfolio vulnerable to credit cycles, and potential regulatory caps in core markets. Market sentiment is mixed, with downward earnings revisions and concerns over asset quality despite recent outperformance. Thus, while the stock's surge reflects operational success, fundamental vulnerabilities underscore the need for caution amid elevated risks.

Implication

Nu's 2025 stock surge reinforces its growth narrative but does not alleviate valuation concerns, as the DeepValue report indicates current prices assume sustained 30%+ revenue growth and ROE above 28%, leaving little room for error. Brazilian macro headwinds, such as high Selic rates and potential GDP slowdown, could pressure NPLs above 8% and compress ROE, triggering significant downside from today's levels. Market sentiment is shifting toward caution, with estimate cuts and underperformance signals suggesting momentum may fade, increasing multiple compression risk. Prudent investors should heed the 'WAIT' rating, targeting entry near $14 to build a margin of safety against unsecured credit exposure and regulatory uncertainties. Close monitoring of quarterly NPL trends, ROE stability, and Mexico's profitability milestones over the next 6-12 months is essential to validate or adjust this stance.

Thesis delta

The article's retrospective praise of Nu's 2025 performance does not shift the investment thesis, which remains centered on valuation and risk factors as outlined in the DeepValue report. If anything, the stock surge has stretched multiples further, amplifying the disconnect between price and fundamental vulnerabilities like Brazilian macro dependence and credit cycle exposure. Investors should look beyond promotional narratives and focus on disciplined analysis of credit metrics and economic indicators to avoid overpaying for growth.