Few can question the fact that the proposed Trump tariffs have rattled investors. Such levies increase the cost of doing business. Hence, with the uncertainty surrounding when tariffs will be implemented or how much they will cost businesses and consumers, most stocks have fallen in recent trading sessions.
Fortunately for investors, 74% of the world’s economic activity takes place outside of the U.S. This allows investors to sidestep the tariff wars by investing internationally. To that end, one digital bank has prospered by making the financial system more accessible in the countries in which it operates, meaning it will likely prosper despite rising levies on goods entering the U.S.
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Investors looking to avoid Trump’s tariffs might want to consider Nu Holdings (NYSE: NU). Nu Holdings is the parent of NuBank, the largest digital bank outside Asia.
It began in Brazil in 2013 but has since taken its successful approach to serving customers in Mexico and Colombia. Since it does not serve Americans, American tariffs are unlikely to affect this business or its performance.
NuBank benefits from a notable competitive advantage since it does not have the cost of maintaining bank branches. More importantly, it has prospered by playing a significant role in changing the face of banking in Latin America.
A small number of banks have traditionally served that region, and since they underserved their markets, it left numerous Latin Americans without a bank account or credit card. Thanks to NuBank, nearly 21 million customers in Brazil have received their first credit card. Amid that approach, it has become so successful that 102 million Brazilians, or 58% of the adult population, now hold at least one account with the digital bank.
That level of saturation prompted NuBank to expand to Mexico and Colombia in 2020. Today, 46% of active customers in Mexico and 30% of Colombian customers had not received a credit card until they became NuBank customers. Today, about 10 million Mexicans and 2.5 million Colombians bank with NuBank.
Despite these successes, the stock has fallen 34% since peaking in November. Brazil’s struggles to reduce government spending and tame rising sovereign debt levels have weighed on Brazil’s economy and, by extension, its stocks.
Still, Nu’s financials show few signs of negative growth sentiments, as it reported $11.5 billion in revenue in 2024, a 43% increase from year-ago levels. Most of the increase came from the addition of 20 million customers during the year, taking the total to over 114 million.
Since it held the line on expense growth, it earned a net income for 2024 of just under $2.0 billion, 91% more than in 2023. That growth also led to its net profit margin rising from 13% to 17% during that time, showing earnings have grown in both absolute and relative terms.
Admittedly, its rapid growth is set to slow down. Nu did not publish guidance, though analysts forecast revenue growth of 29% for 2025. Investors tend not to like such slowdowns even when growth rates are unsustainable.
Nonetheless, valuations seem to reflect Brazil’s political turmoil more than Nu’s successes. With a trailing P/E ratio of 26 and a 19 forward P/E ratio, its valuation metrics more closely resemble an earnings multiple of a mature value stock. That factor alone should make the stock attractive to many investors despite its risks.
Ultimately, Nu Holdings could become a viable option for sidestepping tariff concerns in the U.S. Indeed, investors may not want to trade tariff worries for concerns about fiscal discipline in a developing country.
Nonetheless, the 34% discount in the Nu Holdings stock price could help draw investor interest. Its rapid revenue growth and success in bringing customers into the financial system should continue to bode well for the digital bank’s success.
Additionally, since that value proposition also comes with a low P/E ratio relative to the company’s growth, the fintech stock should remain attractive regardless of the political challenges in both the U.S. and Brazil.
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Will Healy has positions in Nu Holdings. The Motley Fool recommends Nu Holdings. The Motley Fool has a disclosure policy.
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