On Wednesday, Susquehanna maintained a Positive rating on Nu Holdings (Nubank) (NYSE: NU) shares and increased the price target to $14 from $12. The adjustment follows Nubank's report of significant growth across key performance indicators (KPIs) for the quarter.
The digital bank's active customer base saw a 27% rise, matching the previous quarter's growth rate. Average revenue per active customer (ARPAC) also surged by 30% to $11.40, outpacing the prior quarter's 23% increase to $10.60.
Nubank's revenue climbed by an impressive 69%, an acceleration from 66% in the previous quarter. Moreover, the company's net margins expanded substantially to 16.2%, up from 11.3% in the first quarter of 2023. This improvement in margins was attributed, in part, to a stable cost to serve, which remained at $0.9 per month.
The bank's expansion efforts in Mexico have been gaining traction, with the number of accounts on file (AOF) reaching 6.6 million, up from 6 million last quarter. Nubank plans to continue its growth initiatives in Mexico throughout 2024, capitalizing on the country's low credit card penetration.
The revised price target of $14 is based on a peer group price/earnings to growth (PEG) ratio of 0.5x. Susquehanna's analysis suggests that Nubank's performance and strategic expansion justify the uplift in valuation.
Additional details from the analyst's conversation with Nubank's Chief Financial Officer are available upon request, with the main insights reflected in the analyst's report.
InvestingPro Insights
The recent positive assessment by Susquehanna aligns with several key metrics and InvestingPro Tips for Nu Holdings (Nubank). The company's expected net income growth this year and analysts' predictions of profitability underscore Nubank's strong financial trajectory. Notably, Nubank's P/E ratio stands at 54.46, which, relative to its near-term earnings growth, indicates a potential undervaluation of its stock. This is further reinforced by a PEG ratio of just 0.14 for the last twelve months as of Q4 2023, suggesting that the company's earnings growth may not be fully reflected in its current stock price.
InvestingPro data also reveals an impressive revenue growth of 101.52% for the last twelve months as of Q4 2023, with its most recent quarterly growth at 92.22%. Additionally, the company has demonstrated robust profitability with an operating income margin of 41.52% over the same period. It is important to note that Nubank's Price / Book multiple is high at 8.59, which investors typically associate with expectations of high future growth.
For investors looking to delve deeper into Nubank's financial health and future prospects, more InvestingPro Tips are available at https://www.investing.com/pro/NU. There are 6 additional tips that could provide further insights into the company's performance. To access these tips and more detailed analytics, readers can use the coupon code PRONEWS24 to get an additional 10% off a yearly or biyearly Pro and Pro+ subscription.
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