Investing in the stock market is an excellent way to build sustainable, long-term wealth. Every investor dreams of hitting the jackpot with the next big stock, just like Nvidia, Amazon, or Netflix.
Nu Holdings(NYSE: NU) is a financial services powerhouse making waves in the Brazilian market. This company has captured a staggering share of Brazil’s adult population, and its stock has skyrocketed 230% since the start of 2023.
The company continues to expand across new regions and has even branched out into other industries with the goal of driving sustainable growth for years to come. So, could investing in Nu Holdings pave the way to millionaire status? Let’s dive in and see what this promising stock has to offer.
Nu Holdings has transformed the Brazilian banking landscape since its inception in 2016. Nu’s mission is to make banking accessible for all Brazilians. By challenging the long-standing banking oligopoly, the company has opened the doors to financial services for millions, slashing the exorbitant interest rates on credit cards and personal loans.
Nu operates a digital banking model that keeps overhead costs low. This lets it can offer free accounts and credit cards without the hefty fees that other banks charge. Since 2020, Nu’s Brazilian customer base has skyrocketed from 23.5 million to 101.8 million, and it now serves 58% of the country’s adult population.
The company is making strides in Mexico and Colombia. Customer growth in Mexico has nearly doubled during the past year to 10 million, while Columbia’s customer count has tripled to 2.5 million. According to Susquehanna Financial Group, there are 66 million unbanked customers in Mexico, giving Nu a tremendous opportunity to expand its footprint.
Last year was a record for Nu, with revenue rising 58% to $11.5 billion, while net income jumped 28% to nearly $2 billion.
Much of its growth has been driven by credit growth. However, relying on credit for growth has risks. For that reason, Nu Holdings is expanding beyond its traditional financial services roots, venturing into new verticals that create cross-selling opportunities for its vast customer base.
NuPay provides digital payments for both online shopping and in-store transactions. Nu Travel lets users plan and book flights, hotels, and other travel-related services from the app. Nu Marketplace is a comprehensive shopping platform designed to be a one-stop shop for all customer needs. Nu recently introduced NuCel, a mobile phone service, to round out its offerings.
Chief Executive Officer David Vélez told investors, “Our goal is to create an ecosystem that broadens our addressable market and empowers customers to optimize their spending. Building upon the engagement and needs of our customers, we believe this strategy will enable the launch of new verticals in the future.”
The cyclical nature of credit can lead to volatility for financial institutions, particularly during economic downturns. By diversifying into new markets, Nu aims to stabilize its earnings through revenue streams from transaction fees, commissions, and recurring service charges.
Image source: Getty Images.
When considering if Nu is a millionaire-maker stock, determine how much you’re willing to risk in the position. For example, a $10,000 investment may be a huge position, or it could be trivial, depending on where you are in your investment journey.
If you invested $10,000 in Nu, your position would need to grow at a 25.9% compounded annually rate during the next two decades to reach $1 million. Nu continues to grow across Latin America and expand its offerings, and the stock has excellent potential to grow over time. But is it likely to make you a millionaire? That’s the challenge of investing in quality growth stocks — you never know for sure which ones will be the big winners.
Whether Nu Holdings is a millionaire-maker stock depends on several factors, including how much you invest, how long you’re willing to hold, and whether Nu can continue to grow rapidly during the coming years.
I like Nu’s long-term potential and think it’s worthy of a spot in your portfolio. However, you don’t want to rely on any single stock to build wealth. Instead, the key to building long-term, sustainable wealth is consistently adding to your savings over time and maintaining a diversified portfolio across a basket of high-quality stocks and other investments.
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John Mackey, former CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. Courtney Carlsen has positions in Nu Holdings. The Motley Fool has positions in and recommends Amazon, Netflix, and Nvidia. The Motley Fool recommends Nu Holdings. The Motley Fool has a disclosure policy.
