Nu Holdings (NYSE: NU) shares have retreated over the past two sessions, slipping to around $15.60 after touching a monthly high of $16.17. The pullback follows a sharp rally that began in late September, and technical indicators now suggest the stock may face further downside before finding support.
Technical Picture: Resistance and Fair Value Gap
The daily chart shows Nu Holdings rebounding from a low of $12.12 on September 30, a move that accelerated after the company abandoned its pursuit of Monzo. Reports indicate that Monzo sought a valuation Nu considered excessive. The rally continued following Brazil's election, with investors betting on business-friendly policies under the new administration.
However, the stock encountered substantial resistance at $16.17, a level that coincides with the August 14 high. Such resistance levels often trigger profit-taking, and the recent pullback reflects that dynamic. Additionally, the rally created a fair value gap on October 5, and markets frequently attempt to fill such gaps. If the correction continues, the next target could be the Murrey Math Lines pivot at $14.60.
Fundamentals Remain Strong
Despite the technical headwinds, Nu Holdings' underlying business is performing well. The company reported over 139 million customers, up from 105 million a year earlier. Revenue surged to $5.9 billion in the second quarter, compared with $3.8 billion in the same period last year. Profitability also improved, with net income reaching $1.06 billion versus $637 million previously.
Analysts expect this momentum to continue. Consensus estimates project third-quarter revenue growth of 41% year-over-year to $5.91 billion, and full-year revenue is forecast to rise 44% to $22.83 billion. Nu is gaining market share in its core markets, including Mexico, where it has become the largest digital bank. The company is also preparing to enter the United States, offering services such as money transfers and lending.
Wall Street remains optimistic about the stock's prospects. The average analyst price target is $18, implying about 15% upside from current levels. JPMorgan has a target of $23, while Rothschild and Needham both see the stock reaching $19.
In summary, Nu Holdings faces near-term technical resistance, but its robust fundamentals and expansion plans provide a solid foundation. Investors will be watching whether the stock can hold above key support levels or if a deeper correction is in store.
This article is for informational purposes only and does not constitute financial advice.
