Nubank May Never Look This Cheap Again... HUGE Opportunity!

The reason why New Bank is in discussion right now or why I'm so focused on this name is because they've recently changed their strategy and expanded their overall total addressable market. I wanted to talk to you guys about this because of the sheer size in which they've expanded this opportunity. They have a new catalyst and that catalyst leads to opportunities in the stock and the stock is not budging right now. As even right now, we just got one of their largest competitors. This is actually kind of funny. a bank, one of the larger banks in Brazil, Itawu, put a downgrade on New Bank that send the stock down over 3.5% and said that the company is extremely strong in the short term. They also said that the company is likely to do extremely well in the long term, but they said the middle term is not looking so good and it's a little shaky. What does that even mean? I do actually agree slightly, but the fact that you're putting a downgrade because of a slight bump in their margins in the midterm because they're spending for performance in the future is extremely surprising, but it's literally a direct competitor who is pricing them in the market. Let's talk about this new catalyst that New Bank has. New bank takes the next steps into international expansion with the launch in the United States and the introduction of New Global. New Global is their ability to get into remittance payments, transfer of money, opening up bank accounts using stable coins. And they're doing this in 35 separate countries starting like that using cryptocurrency. That has nothing to do with what I wanted to talk to you guys about. But it just goes to show you that this major opportunity that they just opened up is not even in the realm of the valuation that I'm about to give to you guys. What I'm going to be focusing on here is the one country, the United States, for which this is not a small addition. They got conditionally approved for a nationally chartered bank license back in January of 2026. One of the fastest applications to actual bank license that the United States has ever given out. And that's due to new bank size and scale. They're a 60 plus 70 plus billion dollar business that has operated in Brazil, Mexico, and Columbia, serving over 139 million customers. But the opportunity is very interesting in the United States. And I want to let New Bank's co-founders talk about why they're entering the United States. So, let's have a listen. >> Clearly, they haven't ran out of space to grow in Brazil, Mexico, and Colombia. They're doing so well. Why would they even, you know, go try to do the US, which is so hard? It's a big bat. Aren't they going to get distracted? How do you think about that? And how do you see us mitigating that risk on our day-to-day and how we run the company? >> So, there is there's still so much uh uh growth left in core markets, right? We have close to 130 million customers in Brazil, but 7% market share. So, if you start think about the opportunity in Brazil, then the fact that in Mexico we're even smaller. We're already the largest detail bank in the country, but we only have about 60 million customers. And then Colombia early days you can make the calculation that we could just double or triple our business just in in Latin America alone and then you start adding US opportunity and global opportunity there is significant substantial uh potential upside. Execution is key and I think the way we've executed uh every new country from Brazil which we launched with 10 people and a million dollars to Mexico which we launched with about 40 50 people and $10 million or Colombia and now US. I mean how how many people do you have in your team? uh 60 more or less. Yeah, >> it's a it's a it's a team of 60 people out of 10,000 that are mighty focused on an amazing opportunity. That is the way we like we like to try to execute because this is effectively buying a lot of call options on future opportunities. A lot of the focus and priority continues to be as as you really said on on core and even Brazil today while we have close to 120 million customers, we only have 7% of the market share. So the way we think about it is we're building a lot of interoping scurves. Brazil continues to see a lot of that growth. Then you get Mexico, then you see Colombia, then you see US and other products. And um and the majority of the company continues to be executing the the the core focus of those core markets. >> I like what Davidid, this is the actual founder of the business. Well, they're co-founders, Christina and Davidid. Davided's the current CEO. And what I love that he talks about there is the S-curves that we are taking a 60 person team out of their 10,000 employees, grabbing their absolute best. And Christina actually moved her entire family and operations to Miami. So she's all in on the United States venture. She's number two on the entire team. They want to tackle quite a large market but not interfere with their current operations. So it's completely separate. While they do use a lot of technology and the same way that they tackled other markets, that's what they're doing here. But that's what they did like they said in Mexico with 40 people and now they're the largest digital bank in Mexico with over 16 million users. So that same operation is what they've done three times over and have become the largest digital institution in those three countries. The country population for the United States, 341ish million people or 342 versus Brazil, Mexico, and Colombia make it almost a doubling in their total addressable market in terms of the people that they're going after. This is one of the interesting things because in Brazil they have over 100 and nearly almost 120 million users. So they have over 60% of the adult population in Brazil as their active user base who's using them on a day-to-day basis. debit cards, credit cards, payroll loans, personal loans, the regular banking activities that you'd like to see, including investing, small business, medium-siz businesses. So, they once they enter into a market, they expand their total product opportunities into all things financial services. currently as they're entering the United States, they're entering with a very small team, very small funding right now, but they are going in with it with a credit card, debit card, bank account, and a very, very interesting 4.5% APY offering, which is unlike what you're going to see even at a SoFi or a Chime or Robin Hood. I mean, that's some of the best rates you're going to see in the entire country. Who is going to use New Bank? Who are they targeting? What are they going after? This is one of the interesting things. I'll let the co-founders take it away from here as well. >> Chris, who do you think might be the first uh key target customers here in the US? >> Yeah. So, we're very excited first about our own customers, right? Like you you know how much customers from Brazil, Mexico, Colombia that have maybe moved to the US for work, for family, for school have been asking us to come here because they they are accustomed to us like they they got to know us in in their home countries and then they came here and and faced all this bureaucracy and you know bad service and all the fees. So they're of course like very eager to bank with us here in the US. So their own users are going to be the people that are going to use their app. The reason why I highlighted this is because I think a lot of new fintexs that try to enter this market who are starting from nothing will have a very hard time. They have to create a new strategy. They have to find new customers. New bankank especially for the Hispanic population in the United States which is quite sizable already knows New Bank. They're one of the most recognizable brands in Latin America being like the second largest company in financial services there. Aside from if you want to count Micardo Libre there as well, but that's more of an e-commerce play. Whenever you're looking at the overall operation, like I said, they are operating within 139 million people. There is a massive amount of people who use New Bank in other countries and some of those people need to come to America. It's a good way to get started. That's not the end goal, however. The end goal is to grow the same way that they ended up growing in Mexico. Take the initial audience that knows you and then grow from there. Start to work through their referrals, weight lists, all the things that they've tried out and tested that have become viral sensations for them, making new bank the largest financial services platform in all of Latin America. And do that here in the United States the same way that you've done this in previous countries. Unlike Mexico, we're launching here with an account, the credit card, the debit card, and remittances and like and so much more. And we built like a a completely new app and we have like a new brand. We we are able to do so much more today because of everything that we've built before and all the platforms that are now hosting not just the US, but Brazil, Mexico, Colombia, allowing us to be much much more efficient across all markets. They're doing this faster than what they've done before in terms of their entry into the United States, it's faster than how they've done Mexico. So whenever you're talking about this population that has not only extremely done well with new, like this is the one thing that I think people disconnect from the way that New Bank operates their business from the way that Chime or Robin Hood or SoFi or any of these others is that the activity rates is unbelievably high. The satisfaction of the customers who use new is higher than any other platform on earth essentially especially in financial services but for example and Davidid likes to highlight this the number one net promoter score product for consumers in history right now like on the earth it's not the iPhone it's not Tesla it's not the model Y or anything like this it's the Mexico Purple credit card from New Bank that holds a 94 something NPS and it's the most recommended product than any other brand on earth. That type of customer focus that they've done previously is the reason why New Bank is likely to work in the United States because they're working against brands, traditional financial services like Bank of America, Cityroup, Wells Fargo, who have traditionally treated their customers poorly. On top of that, unlike new FinTechs who are entering into this market that can't afford to actually grow these businesses, New Bank can actually fund their United States branch much better than any of the other FinTechs that they're operating against because they're doing $4 billion a quarter in revenue. And by the way, this is in US dollars. They're doing a billion dollars in net income. That is actually quite a jump start to be able to fund operations in the United States. Now, later on, I I want to talk about the opportunity that's in the United States, but it's way bigger than people can actually assume. But like I ended up showing off here, NPS scores across New Bank for Brazil versus their competitors and especially Fintex and incumbent banks broken out separately. You can see how they operate in each one of those countries whenever it's indexed versus their peers. I think that the United States is going to look quite similar. Let's take a look at the actual opportunity here from the United States to the rest of Ladam when it we've already taken a look at the population but the annual GDP of Brazil, Mexico and Colombia altogether is roughly about $4.6 trillion and that's a little bit rounded up versus the United States at $30.7 trillion of annual GDP. You only need a percentage. You don't need 60% of the adult population to potentially double the business of New Bank. GDP per capita is around 90,000. Now GDP per capita is not earned income. That's gross domestic product per person. But that's very very different than earned income. We'll talk about that here in a second. But even to compare all of these put together about 11,000 versus 90,000 just unbelievable difference. Yet, even in operating in those areas for which Brazil, Mexico, and Colombia earn much less, they've still been able to bring in an average annual revenue per user or per active customer at $1710 per user. And as those customers season on the platform, that gets as high as $30.70. But yet, the cost to serve those customers, the actual affordability only about a dollar a month. But you're making $1710 per customer. Let's quickly take a look at Davidid Velesier >> and you make the the easy calculations for income per capita or average spend you end up seeing that in the US you could have an ARP pack about 10 to 20x bigger than Brazil but then we think we can serve the customer at effectively the same cost. So if there's a construct if we have already a constructure advantage with incumbents in Latin America this is an incredible advantage in the US and again ultimately this translates into better value proposition for customers profitably in a way that for an incumbent bank that has all this cost structure becomes really really hard to compete with >> it. it's going to be very hard for them to compete. And that's also why we say that uh one customer here in the US uh is equivalent to maybe 10 or more customers in Brazil because when you adjust for FX for income per capita for the fact that u people in the US use credit a lot more than they do actually in Brazil that we're allowed they were able to underwrite a lot more customers here than we are in Brazil. Like that combination just shows that we don't need that many customers to actually double the size of the company here. So, we it it's a very interesting um um business model for us. >> Like you said, potentially 10 to 20x the value per customer. And yet, the population of the three countries that they're already in almost ties the population of the United States. The difference in annual country GDP. Look at it actually visualized here. It's just an unbelievable difference. And then on top of that, country GDP per capita also visualized. United States is four times larger than their other three combined countries here. Now, like I said, we need to look at average salary because average salary is what's going to bring in deposits, what's going to determine purchase volume, what's going to determine the amount of loans that are taken out. And like they said, the United States population uses a lot more credit than these other three. But on a per month basis, Brazil makes roughly $585 per month, per person. Mexico, $539, even less. Colombia, even less than this $472 almost $473 per person. The United States, 5,985 a month per person. Average salaries, this is 10.2 times higher than Brazil, 11 times higher than Mexico, and $12.6 times higher than Colombia. The opportunity here is unbelievably large. And yet they already have a nationally chartered, fully licensed bank, the same as JP Morgan, the same as SoFi, the same as any other highly regulated financial institution. They're coming at this with billions of dollars of capital and they have a real technology advantage that I want them to talk to. So what's the true opportunity here for new? >> People are paying extremely high fees here. uh we are we know that people are paying north of $75 billion in fees every year in the US consumers are paying and that's on the on the cost that they're actually seeing because you know they in theory they could see the the the the fees that are being charged but when you take into account the deposit side we're talking trillions of dollars that are sitting on accounts idle well they're actually getting paid uh but the banks are taking all the all the payout from those deposit and sitting on their P&L right so we know that um if customers were to get paid yield on their deposits in the US, they were going to get north of $300 billion in yield and today they're getting nothing. I think the average that a deposit in the US gets according to the FDIC is 38%. And that's on an interest rate environment that is close to 4% a year. So how how can how can that be true in the US? You know that's a that's a lot of inefficiency and a lot of money that is um being being taken from uh consumers in the form of fees or absence of yield to go pay all those branches that no one cares for. It's the call centers, it's the branches and anytime that I ever talk about a new fintech, everyone thinks that they're competing against all these other fints. And while new would be directly competing versus the chimes and the cash apps of the world that are trying to go after the average Americans, New Bank sees their opportunity going after the people who are using the Bank of Americas, the Wells Fargos, these companies that are not being served well, but they have such an advantage. What's interesting is people are not aware about the cost that they're paying to receive a certain level of service in this industry. that should have already changed because the cost structure of the industry is changing. >> Yeah. >> And is one of those profit pools that if you look 10 20 years ahead will turns towards zero. It should not exist. There is a there's a arbitrage opportunity in how banks are using their balance sheets. >> They're running on a dying business as Davidid says. There's other ways to make money in financial services. They're already ahead of this. They're doing it the new age way. And the other banks are essentially running this business into the ground because they're taking money away from their customers and not treating them at the level of service that they could, but instead they're taking all those deposits for themselves, paying their customers nothing, and essentially just profiting from this. This is exactly why I'm avoiding all of those companies cuz I think that their valuations will go down over time as the profits come in less and less and less as more customers choose to pick services that are actually treating them correctly like what New Bank is doing. There's a reason. It's not out of coincidence that 60% of the adult population banks with New Bank. They do that because they're getting a true proper service where the money that should be earned by them is being earned by them and not being earned by some duopoly or or some large banking conglomerate within a country which by the way even here in Canada is essentially ran by five large banks. I'm excited for new bank to come to Canada and also offer me a service that is right for me. So we feel very good about the product that we're building and how it suits uh the the needs and pain points of a wider audience of what we're calling a mass affluent customer. So we're not going to try to compete for the very very very high income customers, very valuable segment where there's a lot of competition even from banks and where banks try harder to actually serve them better. We know that's a harder segment to get. But when we look at the mass market in the US, which is massive, even the the the top uh quartile, let's call it, of that segment, which is the more affluent piece of the mass market, they're fairly underserved because they're doing well. They have money saved. Uh they have a a pretty good income level, but they don't have access to the premium products. >> Yeah, this is another very interesting thing, right? Everyone's worried about SoFi versus New or something like this because obviously I'm I'm a big SoFi investor as well, but SoFi will be fine. They are targeting an affluent user base. This is not what New Bank is talking about. They're sort of talking about the people who are making upwards of $100,000 per year. They're on the upper affluent side, but we're not talking about the extremely wealthy customers, especially in the ultra net worth like that's being serviced by the JP Morgans and these sort of large banks. They will fight for those customers. What JP Morgan won't fight for is the people who are making $50,000 a year. In fact, they've only just recently even raised those customers maintenance fees and actually showing those customers, hey, it actually costs us more to serve you than it does to actually benefit from you using our services. New Bank doesn't have the cost of the branches, the call centers, all of these things that is costing them a large amount to run and actually serve those customers. New Bank is set up the proper way for those types of customers and that's why they're going to win. Look at what we can do with an audience and an amount of customers that is not only less population than the United States but also making about onetenth or one 12th of what those users make. Total deposits is roughly $45 billion. Overall purchase volume which is growing at roughly 30% year-over-year at 43 billion. These are similar levels mind you. The purchase volume way higher than SoFi. SoFi is around 28 billion or 25 billion. The deposits is almost identical. Yet SoFi has done that on like 15 million customers. Now imagine New Bank entering this space and potentially doubling those deposits trying to find the next 15 million users that come on through their United States division. And then on top of that, the overall amount of customers for the amount of deposits that they have, 39.4 billion overall total consumer loans, which is also quite good for New Bank. So this is another thing that I wanted to highlight. We'll wrap it here. Why is New Bank going to win? Why did they deserve to win? What actually differentiates them versus other FinTechs who also have very clean structures in terms of their cost to serve? >> If you look at cost to serve, you know, we um uh we invest about a dollar to serve our customers extremely well across the g geographies that we serve. And he even here in the US, we don't expect that cost to be much much bigger than that. And then you look at incumbent banks and they're spending more than 20 times that you know to service customers because of all the branches and the call centers and all their infrastructure that is outdated. So a combination of a different revenue model uh that is going to compete away a lot of their revenue and a cost structure that is like 20x uh someone like ours it that is a very powerful combination for disruption you know so that's something for investors to watch out for for sure >> keeping the cost to serve the same 20xing the potential revenue per customer this is the catalyst that we're walking into by the way the stock is down since they've announced this >> second it's about velocity of testing best-in-class as banks in the US are changing are still today changing credit models every two to three years. We were changing credit models every six months when we began in 2013. By now we're changing credit models every week or every two weeks, right? Everything that uh or that AI and much more sophisticated underwriting capability is giving us. >> This is so interesting as well. It talks about their different approach to not only lending which has they've put that up against their other peers in terms of the performance for all the different customer segments that they have which they are beating their competitors across the board which is actually allowing them to then turn that profit back into potential more sales and marketing which by the way they have worldclass customer acquisition while SoFi holds like a $350 customer acquisition cost. New bank's customer acquisition is closer to $9 per person. the ability to actually do referral and people have been so happy to be serviced by a bank that actually cares about them that they're just telling their friends about it because they want that service as well. this type of approach this new modern forward approach of not only underwriting better creating their own AI so so they have their own models which called new former they have their own GPU clusters they've got a GPU fleet and they're trying to take data unstructured data on 140 million customers gives them such an advantage versus their competitors because they already have a massive swath of data that allows them to be extremely agile on their underwriting stay ahead of the curve and then also turn that profit back into next potential opportunities. I'll give you guys a quick example of one of those opportunities which was actually they said back whenever they were starting the company the two main industries that were most hated by the Brazilian population was number one banking. The top five most hated companies in Brazil all five of them were banks and then the next five were all telecom companies. New bank has also entered the telecom company. They call it New Cell where they offer you a SIM card that you can get a reduced rate and actually a higher deposit fee. So instead of you getting let's say 4% in your checkings that would get boosted up to 5% but you're also paying a monthly rate for your phone bill which they are also taking advantage of that as well. They go after the areas outside of financial services. The opportunity is beyond just deposits and spending. It's just because the United States is such a huge opportunity here. The total addressable market is not needing for them to get into e-commerce just yet or some of these other things which they've also put their heads towards like New Bank's Purple Pages which is another offering between their close-end small to mid-size businesses and their customers to sell between them without any fees. Anyway, what's the disconnect between the stock and the overall opportunity, the catalyst? This is what's so surprising to me. It's not that a company is winning because there's companies like Palunteer that continue to do extremely well, grow at high rates, but the real opportunity is within the valuation. How disconnected is the valuation versus the actual growth? And what we see here is that the price to sales ratio on New Bank 4.9 times while the forward price to sales, which means how much they're expected to grow by next year, is roughly half of that. meaning they're expected to grow an extremely fast amount of revenue by next year, almost double to 2.6 times on a forward price to sales ratio. That means Wall Street's expecting a high amount of growth. But even more importantly than this is their price to earnings. The PE ratio on this is 19 times trailing, much cheaper than SoFi, much cheaper than a lot of the traditional big banks. Yet forward PE because they're expecting so much growth and the margins continue to expand. forward PE 14 times. Some of the most cheapest valuations of this company in most recent history. So, I'm only looking at the last year, but you guys can scroll out as it gets wider and wider. This company has not been this cheap in its entire history. Now, this is not a new company. It might be for you, and this might be the first time you've ever seen this company at a PEG ratio of.5 times, but I've been buying this company since January of 2023, back whenever the company was $3.81. Anyone can go and verify that the videos are still on YouTube right now. Just type in future investing 2023. I think it was called something along the lines of Warren Buffett's next favorite stock because he was buying in at the IPO. Birkshshire Hathaway was the interesting part about this company is that it's cheaper today than it was back at $3.80. Not in terms of the actual price, but the amount of revenue and earnings that have come in since then and the amount of customers. The company has grown faster than the stock has actually accumulated over time. today looks like one of the better opportunities and it's why I'm buying. I'm getting extremely excited about this American opportunity and also we didn't even talk about New Global where they're expanding their services into 35 separate countries. We didn't even remotely talk about that. The opportunities here are huge. They'll compete directly against Revolute, SoFi, Chime, but especially the large banks for which this is one of the most profitable industries in the entire world, financial services. I wouldn't necessarily just brush that off and call it a bank. I would look at it as a business that's growing at 50 plus% margins are expanding ROE of 33% one of the best successful companies and definitely the greatest success story out of Brazil ever in history. So mind-blowing business and that's sort of my wrap there. I'm a buyer.