Nu Holdings Ltd. NU suffered a political shock this week. Following Luiz Inácio Lula da Silva’s reelection in Brazil, its shares fell 16.95% on Oct. 26 to $12.59. The stock finished at $12.05 on Oct. 29, down 20.5% from Oct. 23.
Investors are reassessing Brazilian market risks. The Bovespa Index lost 13.9% on Oct. 26, and the real slid more than 10% against the dollar intraday. Questions about government spending and interest rates matter for Nu because Brazil accounts for most of its customers.
These market worries contrast with operating momentum. Nu generated nearly $5.9 billion in second-quarter 2026 gross revenues, a 39% currency-neutral increase, and $1.06 billion in net income. Its customer base reached 139 million, including roughly 118 million in Brazil. Continued expansion provides some support against economic pressures.
However, credit quality deserves attention. Loans overdue more than 90 days rose 35 basis points to 6.9% in the second quarter, even as earlier-stage delinquencies eased to 4.8%. Prolonged elevated interest rates could increase repayment difficulties, pushing credit losses higher and squeezing lending profitability.
Third-quarter results, tentatively expected on Nov. 12, will help investors assess whether the share-price decline reflects broader market fears or weakening fundamentals. Loan growth, financing costs, credit provisions and currency movements will be important indicators. Sustained operating growth could support a recovery, provided asset quality remains manageable.
Nu Holdings’ Brazil Peers Face Credit and Currency Risks
MercadoLibre MELI faces Brazilian currency and credit risks through its Mercado Pago unit. MercadoLibre reported second-quarter 2026 payment volume of $101 billion, up 56%, while its credit portfolio exceeded $16 billion. MercadoLibre’s lending expansion supports revenue growth, but Brazil’s election uncertainty could increase defaults and pressure margins over coming quarters.
StoneCo STNE also faces Brazil’s shifting interest-rate outlook and merchant credit risks. StoneCo’s second-quarter 2026 credit portfolio reached R$3.75 billion, up 107.5% year over year, while provisions for expected credit losses increased. StoneCo’s merchant-focused lending provides growth potential, although weaker business activity could raise defaults and further restrict lending profitability.
NU’s Price Performance, Valuation and Estimates
Shares of NU have declined 16.6% over the past six months, underperforming the broader industry and the S&P 500 composite.
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From a valuation standpoint, NU trades at a forward price-to-earnings of 10.85X, above the industry’s 10.35X. It carries a Value Score of C.
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NU’s estimates for 2026 have remained unchanged over the past 30 days, while the same for 2027 have been tweaked slightly southward. However, the figures suggest a year-over-year increase of 38.71% and 34.88%, respectively.
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NU stock currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
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This article originally published on Zacks Investment Research (zacks.com).