Shares of Nu Holdings (NU) surged in after-hours trading after the Brazilian digital bank reported earnings for its second quarter of Fiscal Year 2024. Adjusted net income increased to $563 million compared to the $263 million seen in Q2 2023. In addition, sales increased by 65% year-over-year on an FX-neutral basis, with revenue hitting $2.8 billion. However, this missed analysts’ expectations by $10 million.
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These results were driven by customer growth. In fact, the number of customers increased by 5.2 million during the second quarter to a total of 104.5 million, which was 25% higher than last year’s figure. It is also worth noting that gross profit increased 88% on an FX-neutral basis. This is ideal because profits should grow faster than revenue, as this demonstrates a high degree of operating leverage in the business.
However, when not adjusted for foreign exchange rates, the growth rates suffer. For reference, revenue growth is 52% on an unadjusted basis, while gross profit growth is 74%. Still impressive, but it highlights the risks associated with investments that operate in foreign markets. Indeed, according to TipRanks’ Bulls Say, Bears Say tool, currency devaluation is one of the bearish arguments among analysts. Currency fluctuations can act as financial headwinds or tailwinds, which adds an extra layer of uncertainty.
What Is the Price Target for NU Stock?
Turning to Wall Street, analysts have a Moderate Buy consensus rating on NU stock based on four Buys, three Holds, and zero Sells assigned in the past three months, as indicated by the graphic below. After a 60% rally in its share price over the past year, the average NU price target of $14.57 per share implies 14.63% upside potential. However, it’s worth noting that estimates will likely change following today’s earnings report.
