Extrapolating consensus analyst estimates, Nu’s earnings per share could total $1.94 in 2029.
It’s not unreasonable to expect the fintech stock’s valuation to expand to match the market’s multiple.
Investors should realize that like other banks, Nu’s credit activities pose a macro-sensitive risk.
For customers, the financial services industry in Latin America used to be slow, expensive, and frustrating. Nu Holdings (NYSE: NU) is fixing that. With 139 million total customers (as of June 30), it has become a digital banking powerhouse that offers a comprehensive suite of products and services.
Nu shares trade 17% off their peak (as of Oct. 13). But I predict that a $1,000 investment in this fintech stock right now will be worth $2,939 by 2030.
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In the long run, a company’s share price is most affected by its fundamentals. And no single metric matters as much as profits. Own businesses whose net income is set to be much higher in the future, and you stack the odds in your favor.
According to consensus analyst estimates, Nu’s earnings per share (EPS) are projected to grow at a compound annual rate of 35% from 2025 through 2028. Let’s take this forecast, which is obviously full of uncertainty, at face value.
Additionally, assume that in 2029, the company posts another 35% bottom-line gain. This means that in 2029, Nu will report EPS of $1.94.
Valuation expansion can potentially be another catalyst. Nu’s stock currently trades at a price-to-earnings ratio of 18.6, which is very compelling. Comparatively, the S&P 500 (SNPINDEX: ^GSPC) carries a multiple of 23.6. If Nu continues to operate with strong momentum, it’s not unrealistic to see its P/E ratio rise 27% to match the overall benchmark’s.
Taking these two tailwinds together, $1,000 invested in this growth stock could be worth $2,939 by 2030. This translates to a superb 194% return.
Nu’s impressive profit gains, coupled with the attractive starting valuation, support the bull case. It’s hard for investors not to be optimistic. However, don’t let the strong financial performance distract you from the risks. There is no sure thing in the stock market.
Nu’s rapid growth could decelerate sooner than expected. It has a mature position in Brazil. And its newest market, the U.S., presents an extremely competitive landscape that makes it harder to expand quickly.
And as is the case with any bank, changing macroeconomic conditions, paired with credit risk, also open the possibility of financial trouble during recessionary periods. Investors can’t ignore what an economic downturn would do to the company.
That being said, I believe Nu still looks like a high-caliber investment candidate for long-term investors. Buying about 64 shares at today’s price of $15.58 is a good use of $1,000.
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Neil Patel has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Nu Holdings. The Motley Fool has a disclosure policy.
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