What happened? Is it worth betting on resumption?

After the euphoria when entering the stock market, Nubank has faced a strong devaluation. The company’s share is down 20% from the price set when it debuted on the New York Stock Exchange on December 9. On the date, the digital bank sold papers at US$ 9, but on Tuesday (25) the quotation had dropped to US$ 7.20.

What has influenced Nubank’s fall in the market? Is it possible that there is a turning point in this scenario? To answer these and other questions, read below the opinion of experts interviewed by the UOL.

the success of the purple

In a few years, the Nubank has become a successful digital banking model. With the great expansion of the client portfolio, the founders of “roxinho”, as it is known due to the color of the logo, saw that it was time to go public.

On December 9, 2021, the shares of Nu Holdings —holding company of the Nu group (symbol NU), leader of the Nubank group— began to be listed on the Stock Exchange. New York (NYSE). Simultaneously, on the Brazilian stock exchange, the BDRs (at Brazilian depositary receiptsor receipts for a share traded in another country), under the symbol NUBR33.

Why Nubank shares are falling

The entry of the digital bank in the capital market (called an IPO) caused euphoria. On the opening day on the NYSE, the valuation was 14.78%, with the share quoted at US$ 10.33 at the end of the day. But the value of paper has been falling.

With BDRs (Brazilian Depositary Receipts) it was no different. The accumulated devaluation of the launch until January 24 was 33.67%.

The drop caused discomfort among shareholders, but it shows what many experts who follow the bank closely already expected: it would not be possible to sustain itself in such a high price range, as seen in the IPO, for a long time.

Danielle Lopes, partner and stock analyst at Nord Research, explains what has negatively influenced the “purple” shares. According to the executive, there are both macroeconomic issues and Nubank particularities influencing the quotation.

Abroad, the rise in inflation has weighed globally, with the US sending signals that it will continue to raise interest rates in 2022 – and this affects the stock market, with greater impact on some companies.

As Gustavo Cruz, a strategist at RB Investimentos, says, technology and fintech stocks listed in the US and Brazil were more penalized with the prospect of higher interest rates in both countries.

This is because these are sectors that need to raise funds to maintain growth at an accelerated pace — which, at times of higher interest rates, reflects negatively on these companies’ balance sheets.

Usually, banks end up benefiting from a strong financial result at times like these. [de alta de juros], but Nubank is still not profitable. So, the side of increased defaults, with higher interest rates, should prevail.
Gustavo Cruz, strategist at RB investments

For Larissa Quaresma, an analyst at Empiricus, situations like this penalize the stock market as a whole — especially stocks that are very expensive and that are still heading towards a profitable scenario in the future.

Like the Nord Research executive, Larissa also expected a devaluation. At the time of the debut, the specialist did not recommend buying the shares because she considered their valuation “exaggerated” — a process in which the value of a company is estimated, and its fair price and the return on an investment in its shares are determined.

What was implicit in Nubank’s value is that it would become the largest bank in Latin America in a short time. Investors paid for it up front at the time of the IPO. Nubank was listed at R$270 billion, more than Itaú, at R$215 billion, which at that time was the largest bank in Latin America. We think the valuation is exaggerated, but as it is a name that attracts a lot of attention internationally, the IPO ended up being price.
Larissa Quaresma, analyst empiricus

Nubank shares: to buy or not to buy?

Today, Danielle, from Nord research, believes that it is not worth buying Nubank shares due to several factors. They are: the lack of perspective regarding the improvement of its results; cost reduction; monetizing your customer base; and profit generation. “Consequently, there is no prospect of stock price recovery,” he says.

For the strategist at RB Investimentos, the decision to buy Nubank shares depends on the earnings period the investor has in mind.

Nubank gains market share every year, even facing industry giants. For the long term, [compras ações da empresa] seems interesting. For the short term, I don’t think so.
Gustavo Cruz, strategist at RB Investimentos

“The company was valued at a high price at the IPO, which creates extra initial pressure. By deciding to attract many first-time investors with its innovative way of offering the IPO to clients, Nubank ended up getting buy-in from a party that has the risk profile to have shares and is now uncomfortable with the fluctuation”, says Cruz.

The Empiricus analyst, on the other hand, believes that the BDR should fall even further, reaching a fair price of around R$ 2 – that is, the drop could be more than 50% in relation to the current value.

I have Nubank shares, now what?

Those who own Nubank shares, suggests Danielle, should look for the bank’s investor relations area to find out if there is a prospect for growth.

She recommends, however, the sale of these papers and their replacement in the investment portfolio by Brazilian assets that are already showing good results, as foreign investors have been doing.

“It is difficult to sell at a loss, but the loss can be offset with future profits, [ou seja,] buying a stock that actually shows growth. To reduce these losses, the recommended thing is to always look at whether the company is growing or not”,

The executive of RB Investimentos, on the other hand, recommends caution to anyone thinking of getting rid of the digital bank papers. “It seems to me a little hasty by the proximity [de agora com a data] of the IPO. There were Brazilian companies that carried out an IPO without having adequate size and structure. Those, yes, are really more worrisome roles to carry. This is not the case with Nubank”, he says.

From the market’s point of view, Nubank will have to accelerate on some fronts, according to Cruz.”The answer to reverse the situation is to make good use of the funds raised with the IPO and continue growing at an interesting pace. good size and the resources in custody as well, but they still need to be better exploited, including from the point of view of investments. Internationalization movements must also be monitored”.

Nubank was contacted by the UOLbut declined to comment.

About Yadunandan Singh

Born in 1992, Yadunandan approaches the world of video games thanks to two sacred monsters like Diablo and above all Sonic, strictly in the Sega Saturn version. Ranging between consoles and PCs, he is particularly fond of platform titles and RPGs, not disdaining all other genres and moving in the constant search for the perfect balance between narration and interactivity.

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