Nu Holdings' 2026 Optimism Contrasts with DeepValue's Cautious Stance on Valuation and Risks

What happened

A Seeking Alpha article argues Nu Holdings is well-positioned for 2026, benefiting from Brazil's macro carry and a shift towards profitability over raw growth. However, DeepValue's master report rates the stock 'WAIT', noting its rich valuation at 33x P/E and 8x P/B, which prices in high growth expectations. Critical analysis of filings reveals rising credit risks, with 90+ day NPLs a concern, and NIM compression despite strong revenue growth. The article's focus on efficiency gains is valid, but it understates the company's exposure to Brazilian economic volatility and unsecured loan cycles. Investors should balance this optimism with the reality that Nu's stock offers limited margin of safety at current levels.

Implication

The bullish narrative in the news article fails to account for Nu's elevated valuation, which leaves little room for error if growth slows or credit costs rise. DeepValue's base case of $18.50 implies only ~5% upside, while the bear case at $11.00 highlights significant downside risk from macro headwinds. Key risks include Brazil's high interest rates, potential NPL increases, and Mexico's scaling challenges, which require close monitoring. Market sentiment is already shifting, with estimates being revised down and the stock underperforming recently. Therefore, maintaining a 'WAIT' stance is prudent, with any investment contingent on a material price correction or improved risk metrics.

Thesis delta

The news article does not change the core investment thesis; it echoes a bullish perspective that is already reflected in Nu's current valuation. DeepValue's thesis remains intact: the stock is overvalued relative to its risks, and investors should wait for a better entry point or clearer signs of sustainable profitability and credit stability.