Nu Holdings stock analysis: why Nubank shares may soar after its earnings
Nu Holdings stock has stayed in a narrow range over the past few weeks, mirroring the performance of other Brazilian companies. It was trading at $12.08, within the range it has held since the election, in which President Luiz Inácio Lula da Silva won decisively. Still, the stock could bounce back after the company releases its financial results on Thursday.
Nu Holdings results to show strong growth
Nu Holdings, the world’s largest neobank, will be in the spotlight when it publishes its financial results. The earnings are expected to shed more light on its business at a time when investors are concerned about its revenue growth.
Analysts believe that the company’s revenue continued in the third quarter. Yahoo Finance data shows that analysts expect the results to show that its revenue jumped by 44% in the third quarter to $5.98 billion. The most optimistic analyst expects the company’s revenue jumped to $6.21 billion.
Nu Holdings’ earnings per share is also expected to continue growing, moving to 22 cents, up sharply from the 16 cents it made in the same period last year.
These numbers make Nu Holdings one of the fastest-growing companies in the fintech industry. For example, top fintech companies like PayPal and Block have slowed substantially in the past few years.
Nu Holdings has grown rapidly in the past few years because of the its core market in Brazil and its other emerging markets, especially Mexico. It has now become the biggest digital banks in the two countries.
The most recent results showed that the company’s revenue jumped to $5.9 billion in the second quarter, while the number of customers soared to 139 million. In other words, it has added over 74 million customers in the last four years.
Nu Holdings believes that it still has a large addressable market in key countries, including Brazil. One way is to continue adding more services on its platform, a move that is making people more engaged.
Options market points to modest volatility
The options market is predicting modest volatility when the company publishes its financial results. Data shows that the company has an implied volatility of 95%, much higher than the historical average of 75%.
Historically, Nu Holdings tends to be highly volatile after publishing its financial results. Nu Holdings stock jumped by over 16% after publishing its financial results. Before that, the stock dropped by 12% after releasing its first-quarter report. It also fell by 10% after releasing its fourth-quarter results.
Therefore, based on its history, there is a likelihood that the stock will either jump or fall after its earnings report.
Analysts have a bullish outlook of the stock, with the average target being $18.25, up by 51% from the current level. Monness Crespi & Hardt analysts see the stock rising to $20, while UBS upgraded the stock to $20.50. UBS believes that the company has more upside to go because of the ongoing US expansion.
JPMorgan analysts see the stock soaring to $23, while Rothschild and Needham expects it to jump to $19.
Nu Holdings stock price technical analysis
Nu Holdings stock chart | Source: TradingView
The daily chart shows that the Nu Holdings share price peaked at $16.20, its highest point on August 14 and October 12. It then made a strong bearish breakout after Lula’s win.
The stock has continued to consolidate in the past few days. It is slowly forming an island reversal pattern, which is a common bullish sign in technical analysis.
Therefore, the most likely scenario is where the stock rebounds, possibly to the 200-day moving average of $14.10. Such a move would be about 14% above the current level.