Why Reddit and Nu Are Worth Watching for Long-Term Gains?

The parent company of NuBank, Nu Holdings (NU), now stands as the largest completely digital bank outside of Asia by addressing a chronic issue in Latin America's financial system. 

For decades, a handful of entrenched players have controlled access to basic banking products, denying millions of consumers credit cards and bank accounts at all, thereby fostering a belief that there was much greater risk of doing business in this region compared to others and making the region much less appealing to US-based investors. 

However, investors who are willing to endure this volatility will find plenty to value in Nu stock due to how the company transformed retail banking in Brazil (issuing almost 21 million individual first-time credit cards) and now has 127 million customers around the world (more than 110 million customers just in Brazil). 

In fact, Nu holds accounts for approximately 60% of Brazil's adult population, and it seems that the company is executing a similar model in Mexico and Colombia as well, and preparing for additional launches throughout Latin America and potentially a US bank charter application.

The statistics are clear – we have momentum! Revenue for the first nine months of 2025 was $11B (30% increase y-o-y). 

The main trade-off from scaling is significantly higher operating costs (especially interest and other financing expenses) which grew by 53%. 

Despite these increased costs, disciplined cost control elsewhere led to an increase in net income by 39% ($2.0B). 

Investors have taken notice: NU’s stock has appreciated approximately 47% over the past six months and most recently reached an all-time high, and its x34 P/E is still attractive given the growth rate of profits. 

Participating in the long-term hold of the stock will come with added risks and uncertainty due to its established Latin American footprint. However, the first five years of growth (and possibly even longer) make those risks seem reasonable.

Reddit (RDDT) has created a distinct space in the world of social media by organizing its 116 million daily active members into topical communities called subreddits - areas where people can find news, fans of certain topics, debates or discussions about something relevant to their interests or even problems that require solving outside of their own lives. 

Although Reddit is primarily funded by digital advertising like most other social media platforms, there have been few successful imitators, and even large competitors such as Meta Platforms will likely never displace Reddit from its position within this niche.

Reddit (RDDT) had an amazing year in 2025, with revenue for Q4 hitting $726 million, a 70% increase compared to last year. This is the 6th successive quarter of over 60% revenue growth for Reddit. The total revenue for the entire year was over $2.2 billion, which is an annual growth rate of 69%. 

Reddit’s profitability numbers were also impressive, with Q4 net income at $252 million and diluted EPS of $1.24, as well as a FCF of $264 million. CFO Andrew Vollero said that the consistency and strength of these results speak to the success of the Reddit business model.

Again, advertising was the main source of revenue for Reddit, and Q4 ad revenue grew by 75% YoY to reach $690 million in Q4. COO Jennifer Wong stated that the growth of advertising on Reddit was due to strong performance in performance-based advertising, channel diversification, and momentum across multiple verticals. SMF revenue more than doubled for Q4, with 11 out of Reddit’s top 15 vertical categories growing by more than 50%.

As far as user engagement is concerned, Steve Huffman (Chief Executive Officer) was excited about how much of an improvement the recent updates to products have had on the user experience when it comes to onboarding new users and searching on Reddit. In Q4 alone, the number of users who searched directly for Reddit in a week was over 80 million;68 million last year. 

There was also an increase (42%) for Average Revenue Per User ($5.98) compared to 2017. The current forward price-to-earnings ratio (P/E) of 51 indicates that future earnings grow, and that the current value remains attractive to those investors looking for ways to limit their investments due to high prices now. Reddit remains an outstanding candidate to see tremendous growth over the next 5 years and potentially much longer.

Both Reddit and Nu Stock continue to develop their respective opportunity sets, as evidenced by their rapidly growing valuations due to improving profitability. 

However, because the two companies share two of their primary drivers — a defensible niche of social media (which features a very active and engaged community) and a digital bank that provides access to underserved areas — the two companies are likely just beginning to write their respective stories.

Investors who have the patience to weather the unavoidable ups and downs of these two investments should see considerable returns over the next five years.