12 hours ago 2

Why Nu Holdings Stock Is Plummeting Today

Nu Holdings' (NYSE: NU) stock is sinking in Thursday's trading following the company's third-quarter release. The Brazil-based fintech's share price was down 7.9% as of 12:15 p.m. ET.

Nu published its third-quarter earnings results after the market closed yesterday and actually posted sales and earnings that came in ahead of Wall Street's expectations. Despite the Q3 beats, the company's share price is moving lower today as investors and analysts are becoming more bearish about the macroeconomic backdrop in Brazil.

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Nu recorded earnings per share of approximately $0.11 on revenue of $2.94 billion in the third quarter. The average analyst estimate, as polled by FactSet, had called for the business to post per-share earnings of roughly $0.10 on revenue of $2.6 billion. Revenue was up roughly 37% year over year, and earnings per share rose approximately 81%.

The company added 5.2 million new customers in the quarter and closed out the quarter with 109.7 million customers -- up 23% year over year. Meanwhile, the business posted average revenue per customer of $11, representing a 25% annual increase.

In terms of the company's sales, earnings, engagement, and monetization metrics, there really wasn't anything to be disappointed with in the quarter. But the macroeconomic outlook in Brazil has triggered an uptick in bearish sentiment for the stock.

Brazil's economy has recently been missing some benchmarks and seen an unexpected uptick in inflation. In turn, the company's central bank is expected to pursue additional interest rate hikes in order to combat the trend.

Last week, the country's banking authority implemented another 50-basis-point increase -- bringing the core rate to 11.25%. The central bank's incoming leader Gabriel Galipolo said yesterday that sticking to the goal of getting inflation down to its 3% target is nonnegotiable.

While Galipolo said that there were multiple potential avenues that could be taken in pursuit of hitting the target inflation number, continued hikes for interest rates are a likely option. If interest rates continue to rise in Brazil, it could depress equity valuations and create business headwinds for fintech players, including Nu.