Itaú BBA recommends: “Stay away” from Nubank shares
O Itaú BBA reiterated the recommendation to sell the shares of the Nubank and reduced the target price of securities by 31% to US$ 4.5. Nubank’s shares have dropped 64% since the beginning of the year and closed the last trading session quoted at US$ 3.31.
“Although the current stock price appears to be more inviting, we recommend that investors stay away. Earnings momentum will likely remain negative,” analysts at Itaú BBA said in a report. O valuation of Nubank, according to the BBA, “is not at all attractive, especially considering the high volatility of the shares”. According to BBA’s expectations for 2023, the share is trading close to 4x Book Value (P/VP) and 26 Profit (P/E).
Nubank posted an adjusted profit of US$ 10.1 million in the first quarter, reversing last year’s loss. Revenue, which shot up 200%, boosted by the loan portfolio to individuals, was one of the highlights of the balance sheet. This was precisely one of the points criticized by the BBA.
“They are bringing in more interest income, but they also create clouds for medium-term credit risk.” This will translate into a rapid rise in Nubank’s delinquency, according to the report, which “may soon slow down the growth of the loan portfolio”, according to the report.
The BBA also stated that the “delay” in Nubank’s service revenue growth exposes “the structural challenges it faces to monetize so many customers so quickly in an emerging economy.”
The digital bank increased its customer base to 59.6 million in the first quarter, representing growth of 61% over the same period last year. In Brazil alone, there are 57.6 million, but in other Latin American countries the pace of expansion has been greater. In Mexico, the number multiplied tenfold to 2.1 million customers.
Nubank’s delinquency over 90 days was 4.2% and, according to the bank, has been controlled by the quality of selection of good payers.
“Time can prove them right, but we cannot reconcile the selectivity claimed with the pace of growth in light of the drop in real disposable income in Brazil”, countered the analysts. In the quarter ended in April, the average real income of Brazilians dropped 7.9% compared to the same period last year to R$2,569, according to data from the IBGE’s Continuous PNAD.