Should you buy Nu Holdings shares ahead of its third-quarter earnings report?

Nu Holdings Ltd. NU will report its third-quarter 2024 earnings on November 13 after the bell.

Stay up to date on all quarterly releases: See Zacks Earnings calendar.

The Zacks Consensus Estimate for earnings for the to-be-reported quarter is 10 cents, representing year-over-year growth of 43%. The consensus revenue estimate is $3 billion, representing year-over-year growth of 40.7%. There have been no recent changes to analyst estimates or revisions.

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The company has an impressive history of surprising earnings. Earnings have beaten the Zacks Consensus Estimate in two of the last four quarters, once hitting and once missing, with an average earnings surprise of 13.9%.

Nu Holdings Ltd. Price and EPS surprise

Nu Holdings Ltd. Price EPS Surprise | Offer from Nu Holdings Ltd

Third-quarter earnings beat seems unlikely for NU

Our proven model doesn't predict any earnings growth for NU this time. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy), or 3 (Hold) increases the likelihood of an earnings beat. But that is not the case here. Use our Earnings ESP filter to discover the best stocks to buy or sell before they're reported.

NU has an Earnings ESP of 0.00% and a Zacks Rank #2. You can see You can see the complete list of today's Zacks #1 Rank stocks here.

Customer expansion should be NU's driver in the third quarter

We expect the company's significant year-over-year revenue improvement in the quarter under review to be driven by strong customer growth. The Zacks Consensus Estimate for active customers is 90 million, representing year-over-year growth of 21.6%. NU's low-cost operating platform and revenue strength are expected to positively impact quarterly results.

The stock is recovering

NU stock is up a whopping 91% year-to-date and 8.4% in the last month. This price momentum suggests that the stock is in a recovery phase. If we compare NU's performance to that of its close competitors, the results are fascinating. While SoFi Technologies SOFI saw an increase of 41.7%. Banco Santander (Brazil) SA BSBR has suffered a decline of 30% year to date.

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NU is currently trading at a discount relative to its industry. If we look at the forecast 12-month price-to-earnings ratio, NU shares are currently trading at 26.78 times forecast earnings, which is well below the industry's 43.15. Based on trailing 12-month EV-to-EBITDA, NU is currently trading at 23.87x, well below the industry's 56.58x.

A strong business model is crucial for investments

NU's success in Brazil, based on a solid brand, efficient cost structure and improved monetization, is expanding to Latin America, including Mexico and Colombia. In the second quarter of 2024, revenue increased 65% year-over-year and adjusted net income increased 214%, with customer base increasing by 5.7 million to 105 million worldwide. The digitalization trend supports further growth. Despite challenges such as exchange rate risks and competition, NU's future is bright. Growth is expected through geographic expansion in Argentina, Peru, Chile and Uruguay, as well as improving services in current markets.

Grab NU this winning season

NU is currently available at a discount compared to the industry and offers an attractive investment opportunity. With a robust business model, impressive revenue and profit growth potential and a growing customer base, the company is well positioned for continued success. Its strategic initiatives and strong market presence make it the top choice for investors looking to enter the fintech sector this earnings season.

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.