NU HOLDINGS Analysis ($NU)
The Digital Bank Taking Over Latin America
TL;DR
Nubank = world’s largest neobank (127M customers), 3rd largest financial institution in Brazil. Highly profitable, fast-growing, and still undervalued by my metrics. The market sees it as just another fintech. I believe it’s becoming THE bank of the continent.
The Story
In 2013, David Vélez left Sequoia Capital with a simple idea: Brazilian banks are the most profitable and most hated in the world. Exorbitant fees, terrible service, an oligopoly of 5 banks controlling 80% of the market. The perfect breeding ground for disruption.
Twelve years later, Nubank serves 127 million customers. More than the combined populations of France and Germany. In Brazil, they’ve captured over 60% of the adult population. Among their active customers, approximately 60% use Nubank as their primary bank (2025 data).
And the most impressive part? They’re doing this profitably, with a 27.8% return on equity, a level most traditional banks never reach.
The Problem (and Why It’s Massive)
Latin America remains massively underbanked. In Mexico, about one-third of adults still don’t have a bank account. In Colombia, it’s similar. And those who have accounts pay some of the highest fees in the world.
The addressable market is colossal: 650 million people, with a growing middle class discovering consumer credit.
Nubank proved in Brazil that you can conquer an entire banking market in 10 years. Now they’re replicating the formula in Mexico (13M customers, about 14% of the adult population) and Colombia (3.8M customers).
Key point: In Mexico, Nu achieved in 3 years what took 6 years in Brazil. The adoption curve is accelerating.
Why They’re Winning
1. Acquiring a customer costs them almost nothing.
When a traditional bank wants a new customer, they have to pay for advertising, sales staff, branches. Average cost: between $300 and $600 per customer. “Efficient” neobanks spend $30-50.
Nubank? $7 per customer.
How is this possible? Because 71% of customers come on their own. Word of mouth, friend recommendations, natural virality. Only 29% come from paid advertising.
This is the sign of a product people truly love. You don’t recommend your bank to friends if it’s mediocre. This is a huge advantage: Nubank can grow without spending fortunes on marketing.
2. Serving a customer costs them almost nothing either.
A traditional bank spends tens of dollars per month per customer: physical branches, teller staff, paperwork, aging IT systems.
Nubank spends $0.90 per customer per month. Less than a dollar. Everything is digital, automated, optimized.
What does this mean in practice? An average customer generates $13.40 per month for Nubank. It costs $0.90 to serve them. That leaves $12.50 in gross profit per customer per month. About $150 per year, per customer, before fixed costs. Multiply by 127 million customers and you see the power of the model.
3. Each customer generates more and more over time.
A new Nubank customer generates $0.80 in the first month. Not much. But they stay, use more services, and generate more and more:
After 1 year: $1.50/month
After 3 years: $5.50/month
After 5 years: $12/month
After 8 years: $27/month
And customers using multiple products (card + account + credit + investment) generate $45 per month. More than 3x the current average.
In other words: the base of 127 million customers will naturally generate more each year, even without adding a single new customer. That’s the power of a model that creates loyalty.
4. The magic ratio: spend $7, get back $200-270.
Let’s recap. Nubank spends $7 to acquire a customer. This customer stays an average of 8-10 years and generates value over that period.
Here’s my Lifetime Value (LTV) estimate range:
Conservative scenario: $200 (if the customer stays 6 years with average revenue of $10/month)
Median scenario: $270 (if the customer stays 8 years with average revenue of $13/month)
Optimistic scenario: $350 (if the customer stays 10 years with average revenue of $16/month)
I base my analysis on the median scenario of $270, which gives an LTV/CAC ratio of approximately 30 to 40x.
What can vary the LTV:
Customer retention (currently 83% are active)
Evolution of revenue per customer (which naturally increases with cohort age)
Regulation (tightening of credit rules in Brazil could reduce revenues)
Competition (aggressive new entrants could lower margins)
So for every dollar invested in acquisition, Nubank recovers between 30 and 50 times the investment. In the industry, a 3x ratio is considered good. 5-10x is excellent. 30x+ is exceptional. It’s the sign of an extremely efficient business model.
5. They can launch products 10x faster than banks.
Nubank made a radical technical choice from the start: build their entire infrastructure on modern technologies (notably a language called Clojure, used by less than 3% of developers).
Concrete result: when a traditional bank wants to launch a new product, it takes 18 months to untangle its IT systems inherited from the 90s. Nubank takes 3 weeks.
This velocity allows them to innovate continuously and respond quickly to customer needs. And it attracts the best engineers, who want to work on modern systems.
6. International expansion is working.
Mexico already shows revenue per customer of $12.50/month. Almost identical to Brazil after only 3 years. And Mexico has more favorable characteristics: income per capita about 40% higher than Brazil, and a more developed revolving credit culture.
CEO David Vélez said it during the last conference call:
“If we wanted to be profitable in Mexico, we already would be. It’s a choice to invest.”
Translation: they could take their profits now, but prefer to reinvest to conquer the market faster. This is exactly what we want to see in a Fast Grower.
What the Market Doesn’t See
The market values Nubank at about 34x its current annual earnings, but only 20x its expected future earnings (Forward P/E of 20.09). This seems “expensive” compared to traditional banks trading at 10-12x their earnings.
But this comparison makes no sense. Nubank is growing 40-43% annually. Traditional banks at 5%. You don’t value a rocket like a car.
Three things the market underestimates:
1. The bigger they get, the more profitable they become. The cost-to-revenue ratio went from 33% to 27.7% in one year. Each new dollar of revenue costs less and less to generate. This is called operating leverage. And it’s just beginning.
2. Current customers will generate much more. Average revenue per customer is $13.40/month. But loyal customers for 8 years generate $27/month. And those using multiple products generate $45/month. The current base will naturally migrate to these levels.
3. Mexico can become as big as Brazil. 130 million inhabitants, a growing middle class, and only 14% penetration for Nubank. In just 3 years. The potential is immense.
The market sees a fintech that succeeded. I see a bank dominating a continent.
Key Figures (Current Data - January 2026)
Growth
127 million customers (+16% year-over-year)
$12.84 billion annualized revenue (+39% year-over-year)
$2.53 billion annualized net income (+44% year-over-year)
Expected earnings growth: +42.9% for next year
Profitability
Return on equity: 27.8% (excellent, despite slight decrease due to international investments)
Revenue per customer: $13.4/month (+20% year-over-year)
Cost-to-revenue ratio: 27.7% (declining, which is good)
Net margin: approximately 19.7%
Model Efficiency
Cost to acquire a customer: $7 (71% come for free)
Cost to serve a customer: $0.90/month
Customer lifetime value: between $200 and $350 (median scenario $270)
Value/acquisition cost ratio: 30-40x (exceptional)
Portfolio Quality
Active customer rate: 83% (very high, they don’t leave)
Non-performing loan rate (NPL): 6.8%
Important note on the 6.8% NPL: This rate is higher than a traditional bank (which runs around 3-4%), but this is normal for three reasons:
Nubank targets a younger, less banked population, naturally riskier
Recent cohorts (new customers) have higher delinquency rates that normalize over time
The rate has been stable for 2 years and is well provisioned (coverage ratio > 100%)
My red line: if NPL exceeds 8.5% for two consecutive quarters, it’s a signal that risk management is deteriorating.
Market Data
Market capitalization: $84.36 billion
Current price: $17.46
Average volume: 29.4 million shares/day
Debt/Equity: 3.18 (high but normal for a bank)
Is It Expensive?
The key metric: PEG is 0.49 (Finviz data)
PEG is the price/earnings ratio divided by the growth rate. Basically, it measures how much you pay for each point of growth.
A PEG of 1 = you’re paying fair value
A PEG below 1 = you’re paying less than the growth
A PEG above 1.5 = you’re starting to overpay
Nubank has a PEG of 0.49. The market values the stock at 20x future earnings, for expected growth of 42.9% per year. So you’re paying for growth at a 51% discount. This is exceptional for a company of this quality.
Possible Scenarios
🟢 Optimistic Scenario (20% probability) Everything goes well: Mexico takes off, margins improve, market re-rates the stock, growth exceeds 45%. Target: $38, or +118%
🟡 Base Scenario (55% probability) Growth continues at current pace of 40-43%, margins improve gradually. Target: $29, or +66%
🟠 Pessimistic Scenario (17% probability) Slowdown in Brazil, Mexico disappoints, margins stagnate, more aggressive competition from Mercado Pago. Target: $15, or -14%
🔴 Catastrophe Scenario (8% probability) Major economic crisis in Brazil, explosion of bad debts, strong Real devaluation. Target: $9, or -48%
Weighting these scenarios, the expected return is approximately 52% over 2 years, or 24-25% annually.
The gain/risk ratio is 2.9 to 1. In other words, the upside potential is 2.9 times greater than the downside risk. This is a favorable asymmetric profile.
How I Arrive at My Target
In 2 years, here’s what I anticipate:
More customers: 127M → approximately 165M The machine continues to run in Mexico and Colombia, with accelerating growth.
More revenue per customer: $13.4 → approximately $17/month Customers adopt more products, cohorts mature, Mexico contributes more.
Important nuance: During an economic slowdown phase, revenue per customer growth can temporarily stagnate (customers use less credit, repay more slowly). This is normal in a banking cycle. But over 2-3 years, the underlying trend remains upward due to cohort maturation.
More margin: 19.7% → 23-24% Operating leverage plays out, fixed costs dilute, Mexico reaches profitability.
Result: net income goes from approximately $2.5B to approximately $5.2B.
Even if the market slightly compresses the valuation multiple (from 34x to 28x on current earnings), this gives a target price of $28-30.
The Risks (and When I Would Sell)
Bad debts explode If the non-performing loan rate exceeds 8.5% for two quarters, I reduce my position by half. This would mean their credit risk management is deteriorating.
Customer growth stops If Nubank adds less than 2 million customers per quarter for 3 consecutive quarters, I reassess the thesis. The growth engine would be stuck.
Customers leave If the activity rate falls below 78% AND revenue per customer drops below $12, I reduce by half. This would mean the product no longer engages.
The founder leaves David Vélez and Cristina Junqueira are the soul of this company. If either of them leaves, or if Nubank becomes a company run by bureaucrats, it’s a major warning signal.
Regulatory cap on revolving rates If the Brazilian government votes for an aggressive cap on revolving credit rates (below 200% annualized), I reduce my position by 50%. This would significantly impact Nubank’s revenues.
A crisis in Brazil Brazil represents 60% of the business. A severe economic crisis would impact bad debts. But Nubank has an advantage: with 60% of Brazil’s adult population as customers, no politician can attack them without alienating their own voters. They’ve become “too loved to fail.”
Debt/equity ratio of 3.18 For a bank, this is normal (they operate with leverage). But I monitor that this ratio doesn’t exceed 4.0, a sign they’d be taking too much risk.
Currency risk This is an important point many investors overlook. Nubank generates its revenues in Brazilian Real (60%), Mexican Peso (25%), and Colombian Peso (15%). For dollar-based investors, exposure to the Brazilian Real is the main risk.
The Real is historically volatile: it can fluctuate 20-30% in a year against the dollar. Concretely, even if Nubank performs at +30%, a 20% Real devaluation can reduce your gain to +4% in dollars.
How I manage this risk:
I consider NU as a “long-term” position (2-3 years minimum) to smooth volatility
I don’t invest more than 12% of my portfolio in this position
I monitor Brazil’s macro indicators (inflation, Central Bank’s key rate)
Regulatory and macroeconomic risks
Beyond currency, three structural factors can impact Nubank:
1. PIX - Free instant payment The PIX system (launched by Brazil’s Central Bank in 2020) enables instant, free transfers. This reduces commission revenues that banks derived from traditional transfers.
Impact for Nubank: Nubank largely compensates for this loss through credit growth (cards, personal loans) and insurance/investment products. Revenue per customer continues to rise (+20% year-over-year), so PIX isn’t a brake. It’s even an advantage because it makes the product more attractive.
2. Brazilian key rates (Selic) Brazil’s Central Bank currently maintains the Selic rate around 11-12% (high by global standards). If rates drop sharply, Nubank’s net interest margins (NIM) could compress.
My analysis: A moderate decrease (toward 8-9%) would actually be positive as it would stimulate credit demand. Only a very aggressive drop (below 6%) would affect margins. Nubank also diversifies its revenues (interchange fees, insurance, investment) which limits dependence on interest margins.
3. Revolving rate caps The Brazilian government regularly discusses capping revolving credit card interest rates (currently around 400-450% annualized).
My analysis: This is the most serious regulatory risk. If revolving rates are capped below 200% annualized, Nubank would lose a significant portion of its revenues. However, with 60% of Brazil’s adult population as customers, Nubank has become politically essential. A brutal cap would be unpopular and difficult to implement.
My regulatory red line: If an aggressive capping bill (below 200%) is passed, I immediately reduce my position by 50%.
The competition Nubank’s main competitor isn’t a traditional bank, it’s Mercado Pago (Mercado Libre’s fintech). Mercado Pago has the advantage of being integrated into Latin America’s most powerful e-commerce ecosystem.
In Brazil, Mercado Pago has about 40 million active users. In Mexico, about 15 million.
Why I remain bullish on Nubank versus Mercado Pago:
Nubank has 3x more customers (127M vs 55M for Mercado Pago)
Nubank’s revenue per customer ($13.40/month) is higher than Mercado Pago’s (~$8-9/month)
Nubank has better profitability (ROE 27.8% vs 20-22% for Mercado Libre group)
Both can coexist: Mercado Pago captures the e-commerce ecosystem, Nubank captures daily banking needs
My Detailed Score
Growth (out of 30): 29/30 +42.9% expected earnings growth, +39% realized revenue growth. Exceptional.
Profitability (out of 20): 18/20 27.8% return on equity, 19.7% net margin, solid balance sheet.
Valuation (out of 20): 18/20 Exceptional PEG of 0.49, Forward P/E of 20x very attractive for this growth.
Competitive Advantages (out of 15): 14/15 $7 acquisition cost, 71% free acquisition, 10x cheaper to serve. Difficult to replicate.
Gain/Risk Ratio (out of 15): 12/15 2.9:1 excellent, expected return of 25%/year. Very good.
TOTAL: 91/100
My Verdict
🟢 STRONG BUY | ⭐⭐⭐⭐⭐ (5/5) | Score: 91/100
Current price: $17.46 Buy zone: between $16.50 and $18.50 I add more if: the price drops to $15 on a panic (add aggressively) 12-month target: $24 (+37%) 24-month target: $28-30 (+60-72%)
Why 5 stars?
The PEG of 0.49 is exceptional for a company of this quality
The anticipated growth of 42.9% is robust and sustained
The gain/risk ratio of 2.9:1 is very favorable
The expected return of 25%/year meets my minimum target
The fundamentals (ROE 27.8%, expanding margins, CAC of $7) are solid
The business model (LTV/CAC of 30-40x) is one of the best in the financial sector
This is an exceptional opportunity, with well-identified risks (currency, credit, Latin America) that I consider manageable.
In Three Sentences
What the market ignores: Nubank is no longer a startup. It’s a highly efficient cash-generative model on its mature cohorts - it spends $7 to acquire a customer who will generate between $200 and $350. And 71% of these customers come for free. The PEG of 0.49 for 43% growth suggests a mispriced opportunity.
What I expect: That the current 127 million customers will generate more and more (from $13 toward $20-27/month as they age in the system), and that Mexico confirms its potential by reaching 20-25 million customers within 2 years.
My decision: I’m buying at $17.46 or adding to my position if I already have one. I double down at $15 if the market panics. Target $28-30 in 24 months. The risks (currency, credit, Latin America) are real but manageable in my view. This is a 5-star opportunity.
Questions about this analysis? Leave a comment or reach to me on X @Axel_Lynch_Inv
Disclaimer: This analysis reflects my personal opinion and does not constitute investment advice. I hold NU shares. Do your own research. Eat five fresh fruits and vegetables a day 🍏