Marko Geber
Citi downgraded Nu Holdings (NYSE:NU) to Neutral from Buy given deceleration headwinds and limited upside, leaving little room for further re-rating.
"Despite NU's impressive run, we see several headwinds ahead: slowdown in cards TPV, caps in pre-paid cards' interchange, potential changes in revolving lines, lower interest rates, and higher capital requirements," said analyst Rafael Frade.
He believes new initiatives (like Mexico and Payroll) will not be enough to offset these headwinds in the short term, leading to a "material" deceleration in Nu's (NU) top-line.
In addition, Nu's (NU) large market share will make it more challenging for more material market share gains.
Citi revised its 2023/2024 earnings estimates for Nu (NU) to $670M/$1,095M to reflect the above headwinds (EPS estimates $0.14/$0.23 vs. consensus $0.12/$0.19).
Price target was cut to $6.10 from $7, implying 1.3% potential downside to NU's last close. Shares of Nu (NU) gained 72.4% YTD.
While sell-side ratings for Nu (NU) are largely bullish, Citi's stance is in line with SA Quant's Hold rating.