Nu Holdings (NYSE: NU) shares rallied sharply on Wednesday after the digital bank reported second-quarter results that smashed expectations, with revenue and profit both coming in well above analyst forecasts. The stock has now gained more than 30% since early June, and the latest print suggests the momentum may have further to run.
Record quarter for the neobank
Revenue climbed 39% year-over-year to $5.9 billion, while net income surged 49% to $1.1 billion — the company's first quarter ever with net income above the $1 billion mark. On a per-share basis, Nu earned $0.22, beating the $0.20 consensus estimate.
The strong performance was driven by record unit economics. The risk-adjusted net interest margin (NIM) expanded to 12.4% from 9.9% a year ago, surpassing even the most bullish expectations of around 11%. Management indicated that this margin profile is sustainable in the near term, citing a record-low efficiency ratio that reflects strong operating leverage.
Technical and options signals point higher
From a technical standpoint, the post-earnings rally pushed NU shares above their 20-day moving average, a sign that bulls have regained control. Options pricing also suggests additional upside: the put-to-call ratio for contracts expiring in mid-September stands at 0.27, with the upper price target of $16.65 implying a potential 7.58% gain over the next four to five weeks.
Investors may also find reassurance in the company's credit metrics. Cost of credit declined sequentially to $1.7 billion, easing concerns that had weighed on the stock in the first quarter. Asset quality and underwriting in Brazil remain well-controlled, according to the company.
Growth across markets and a new buyback
Nu added 4 million customers in the quarter, bringing its global client base to 139 million. The Mexico unit reached break-even after securing a full banking license earlier this month, unlocking full deposit-taking and lending capabilities in one of its fastest-growing markets.
In a sign of confidence in future cash generation, the board approved a new $1 billion share repurchase program. Wall Street analysts remain bullish, with a consensus rating of Overweight and a mean price target of just over $17, implying about 11% upside from current levels.
As the digital banking sector continues to evolve, Nu's ability to maintain its margin expansion while growing its customer base will be key. The company's focus on operational efficiency and expanding into new markets positions it well for sustained growth, though investors should keep an eye on competitive pressures and macroeconomic conditions in Latin America.
For broader context on market trends, see our coverage of S&P 500's record run and Marvell's recent pullback.
This article is for informational purposes only and does not constitute financial advice.
