Brazil's Nu earns flurry of analyst upgrades after strong results

SAO PAULO, Aug 20 (Reuters) - A series of sell-side analysts have upgraded their recommendation on Nu Holdings NU.N in recent days, helping drive its shares higher after the company behind Brazilian digital lender Nubank reported strong second-quarter results.

WHY IT'S IMPORTANT

Nubank is one of the world's largest digital lenders, with nearly 123 million clients across Brazil, Colombia and Mexico. It is also one of Latin America's largest companies by market value.

New York Stock Exchange-listed shares of Nu rose more than 2% premarket trade on Wednesday after the latest upgrade from analysts at Citi, which followed similar moves by BTG Pactual and Itau BBA earlier this week.

CONTEXT

Citi upgraded Nubank to "Buy" from "Sell" and raised its target price to $18 per share from $9.

BTG Pactual upgraded the stock to "Buy", from "Neutral", for the first time since Nu's IPO in 2021, pointing to a more reasonable valuation, while Itau BBA raised it back to "Outperform" nine months after a downgrade it had tied to challenges in credit card profits.

KEY QUOTES

"Our initial concerns regarding card profitability and the local credit cycle have lessened," Itau BBA analysts said. "Household macro dynamics are performing better than expected, while the company has demonstrated resilience and adaptability."

BTG Pactual said it had been "flirting" with the upgrade for months. "With Brazil's credit card TPV (total payment volume) re-accelerating, Mexico gaining traction, and upside potential from payroll, we believe the stock has room to re-rate again," it noted.

BY THE NUMBERS

Nu Holdings reported last week a 42% increase in its net profit from a year earlier on a foreign exchange-neutral basis, with revenue jumping 40%. Its shares are up more than 26% so far this year.