Shares of the leading digital financial services platform provider, Nu Holdings (NYSE:NU), dropped more than 55% in the past year. Given the significant decline, Nu Holdings is now a penny stock. While NU stock has lost substantial value, Wall Street analysts maintain a bullish outlook and see solid upside potential based on the analysts’ average price target.
Is NU a Buy Right Now?
Nu Holdings primarily focuses on the Brazilian, Mexican, and Colombian markets. Given the short-term macro headwinds, primarily from higher interest rates, NU has witnessed a moderation in its personal loan growth rate.
It’s worth highlighting that NU’s personal loans increased by 400% in Q1. Meanwhile, the growth rate moderated to 250% and 111% in Q2 and Q3, respectively. Also, personal loans declined on a sequential basis in Q3. Furthermore, economic challenges have led to an increase in delinquency rates.
The challenges from a tough macro environment and higher interest rates continue to restrict the upside in NU in the short term. However, its ability to expand its customer base and drive interest in its earnings portfolio provides a solid platform for long-term growth.
Its growing active customer base, higher revenues per customer, and low platform operating costs augur well for profitability in the long term. Further, management expects net interest margins to improve as loans continue to grow faster than deposits and the cost of funding is optimized.
NU stock has a Strong Buy consensus rating on TipRanks based on five Buy and one Sell recommendations. Meanwhile, NU’s price target of $7.35 implies 101.92% upside potential.
The short-term macro headwinds could keep NU stock volatile in the near term. However, its growing customer base, expansion of its loan portfolio, and focus on driving operating leverage will likely support its stock price in the long term. While Nu Holdings is an attractive long-term penny stock, investors can use TipRanks’ Penny Stocks Screener to find more such companies that are more likely to deliver solid returns.
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