NU stock: why Q2 earnings may have unlocked further upside

Nu Holdings NU shares are ripping higher this morning after the neobank reported blowout fiscal Q2 earnings, featuring a decisive top- and bottom-line beat.

On the back of record unit economics, NU's revenue climbed 39% year-on-year to $5.9 billion (approx. £4.5 billion) – helping its net income soar a remarkable 49% to $1.1 billion (approx. £802.4 million) in the second quarter.

The quarterly print adds to momentum that has already driven NU stock up more than 30% since early June.

NU stock rallies on achieving a major milestone

Investors are cheering Nu Holdings primarily because the Q2 marked its first quarter of $1 billion (approx. £757 million)+ net income since its inception in 2013.

On a per-share basis, the company earned $0.22 in its second fiscal quarter, handily beating $0.20 that analysts had forecast.

Investors should note that there’s significant technical momentum in play on August 14^th as well.

The post-earnings rally pushed NU shares past their 20-day moving average (MA), indicating bulls have taken back control and the upward pressure could sustain in the near-term.  

Options pricing suggests further upside in NU shares

NU stock looks attractive also because the company’s Q2 risk-adjusted net interest margin (NIM) expanded to a record 12.4%, up from 9.9% a year ago, beating high-side bull cases (which centered around 11%).

Crucially, management noted this margin profile appears sustainable in the near term – especially since the efficiency ratio hit a record low, highlighting strong operating leverage as fixed overhead costs remained contained while monthly average revenue per active user (ARPAC) climbed more than 35% versus last year to $17.1.

Investors could also take heart in the fact that options pricing currently suggests Nu Holdings isn’t out of juice just yet.

The put-to-call ratio on contracts expiring mid-September sits at 0.27 currently, with $16.65 upper price indicating potential for another 7.58% rally from here over the next four to five weeks.

What’s the Consensus Rating on Nu Holdings?

Nu Holdings' second-quarter release also alleviated another major concern: cost of credit – which had pressured the stock in Q1 due to credit quality fears – declined sequentially to $1.7 billion (approx. £1.3 billion).

This suggests that asset quality and underwriting in Brazil remain well-controlled.

Moreover, the fintech firm added 4 million customers in Q2 to reach 139 million clients globally, with the Mexico unit reaching break-even after securing a full banking license earlier this month.

This unlocked full deposit-taking and lending capabilities in its fastest-growing market.

Finally, NU's board approved a new $1 billion (approx. £757 million) share repurchase program, signaling confidence in future cash generation and balance sheet strength.

Wall Street analysts also believe the company remains undervalued at current levels.

According to The Wall Street Journal, the consensus rating on NU shares sits at Overweight currently, with the mean price target of just over $17 indicating potential upside of another 11% from here.