Nu Holdings‘ (NYSE: NU) Shares are sinking in Thursday trading following the company’s third quarter release. The Brazil-based fintech’s stock price was down 7.9% as of 12:15 p.m. ET.
Nu released its third-quarter earnings results after the market closed yesterday and actually posted sales and profits that surpassed Wall Street expectations. Despite the good third quarter results, the company’s share price is declining today as investors and analysts are becoming more pessimistic about the macroeconomic context in Brazil.
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Nu posted earnings per share of about $0.11 and revenue of $2.94 billion in the third quarter. The average analyst estimate, according to a FactSet survey, was for the company to post earnings per share of about $0.10 on revenue of $2.6 billion. Revenue increased approximately 37% year over year and earnings per share increased approximately 81%.
The company added 5.2 million new customers in the quarter and closed the quarter with 109.7 million customers, a 23% year-over-year increase. Meanwhile, the company reported average revenue per customer of $11, representing a 25% year-over-year increase.
In terms of the company’s sales, earnings, share, and monetization metrics, there was really nothing to be disappointed about in the quarter. But the macroeconomic outlook in Brazil has caused a rebound in bearish sentiment towards the stock.
Recently, Brazil’s economy has missed some benchmarks and has experienced an unexpected spike in inflation. In turn, the company’s central bank is expected to implement further interest rate increases to combat this trend.
Last week, the country’s banking authority implemented another 50 basis point increase, bringing the base rate to 11.25%. Incoming central bank leader Gabriel Galipolo said yesterday that sticking to the goal of reducing inflation to its 3% target is non-negotiable.
While Galipolo said there were multiple potential paths that could be taken to reach the inflation target, continued interest rate increases are a likely option. If interest rates continue to rise in Brazil, it could depress stock valuations and create business obstacles for fintech players, including Nu.
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