Debit card on the edge of the shelf

Richard Drury

New Holdings (New York Stock Exchange: NU) is an interesting company that has fallen significantly due to general rotation from tech where multiples have collapsed.We liked Nu because we could easily grow our revenue by penetrating the unbanked It also cross-sells customers and maximizes customer lifetime value at the lowest customer acquisition cost. Revenue growth continues despite expected macroeconomic challenges, with clearly negative marketing and business development efforts as a means of reinvestment. We are hesitant to call tech because the sector is sensitive to market movements, but we are confident that we have Nu on our watchlist.

Second quarter results

Our insights on Nu are primarily focused on one concept. That is, as of the last article, customer acquisition costs are probably still low at the $5 level. This may have changed as declining consumer confidence has led to marginal consumption declining and possibly rising somewhat, but so has revenue per customer.

ARPAC chart

ARPAC chart (Second Quarter 2022 Press)

Although ARPAC growth tapers across cohorts, what is compelling is the higher ARPAC achieved in the long-term cohorts, with an average ARPAC growth of 50%. At his APRAC of $7.8 per month, and assuming that attrition within the cohort is taken into account, this number means an average ROI of 50% for customer acquisition in one month. Incredible 230% year-over-year revenue growth driven by overall customer growth (75% year-over-year active user growth), even including stock-based compensation and other early-stage company expenses The company was technically able to ensure profitability.

This is not due to growth in consumer finance, but more elements of a full banking platform, including life insurance product Nu Vida, one of the most successful in terms of early growth in Brazilian history. It is due to – Sell brokerage services through Easyinvest (which will be called NuInvest after the merger). The only thing that hasn’t grown remarkably is loan balances, as credit standards have tightened as a result of the macroeconomic outlook. Thankfully, loans involving credit card assets are very short-lived and there are no signs of a significant increase in loan delinquencies.

asset growth

asset growth (Second Quarter 2022 Press)

We also see loan yield levels rising in line with monetary tightening, but interest rate theory is rather limited in Nu’s big picture.


The recent P/S multiple is relatively low at just 3.83x. While it is true that some momentum may be lost as the global economy shrinks, Nu’s primary market is the local currency’s commodity leverage and its strength against reserve currencies like the dollar. , more resilient thanks to local access to commodities supported by relatively left-leaning governments. , that’s the case for Brazil, which has long leaned to the right, due to Lula’s high chances of winning.

We believe that low multiples do not reflect growth potential and the ability to generate margins, which is true of many technologies.

Another thing to consider is that left-wing governments are known to crack down on companies that loot. In general, the credit card industry can be seen as somewhat predatory in terms of rates, and in general, strategies focused on the large unbanked population are not the answer to Qudian (QD) in China. ) can be repressed by left-wing governments in general.Lula is grappling with household debt issues and says it will be considered negotiation We are in consultation with the private sector on this issue and the benefits to households are likely to come at the expense of the private sector.

This last issue is still unlikely, but we’re considering it and generally won’t be moving with Nu other than putting it on our watchlist to watch.

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