I Still Like Nu Holdings Stock, But Right Now, I Like This Alternative Even Better

There’s no denying it. Nu Holdings (NU +1.64%) has been an incredibly rewarding stock of late. Shares of the online-only bank serving consumers in Brazil, Mexico, and Colombia spiked in value by 60% last year, adding to 2024’s gain of 25%. It’s still going strong, too.

And that’s the problem. While you should be willing to pay a premium for a quality stock, that doesn’t necessarily mean you have to, particularly when there’s a similar alternative available at a more attractive price.

For me right now, that alternative is U.S.-chartered online bank SoFi Technologies (SOFI +1.70%).

Image source: Getty Images.

SoFi is a growth machine

On the off chance you’re reading this and aren’t familiar with it, just as described, SoFi is an online-only (no brick-and-mortar branches) bank serving the U.S. market.

Founded in 2011 mostly to help people manage their student loan repayments, the company has expanded its offerings to everything ranging from checking accounts to credit cards to brokerage services, and more. As of the end of last year, the $24 billion organization boasted $50 billion in assets and a little over 13.6 million customers, having grown its customer headcount every quarter since 2019, when it was serving less than 1 million people.

Perhaps more importantly, Q4’s record-breaking net revenue of $1 billion was up 37% year over year, capping off a full year of comparable growth. Analysts are looking for roughly the same pace this year and next as well.

Online banking is the new norm

If that sounds impressive, that’s because it is. It shouldn’t be surprising, though. Online or app-based self-service for nearly everything is the new norm these days, and increasingly so. Anyone under the age of 50 has enjoyed relatively easy access to the internet for most of their adult lives, while smartphones have always been around for anyone under the age of 25.

Data from the American Bankers Association puts things in perspective. A recent poll of U.S. consumers found that 54% of bank customers in the United States first and foremost used a mobile app to handle banking business, while computer-based access was the second-most popular option, at 22%. In-branch visits and telephone calls, conversely, were quite far down the preference list, at 9% and 4% (respectively).

And for what it’s worth, even the baby boomers who didn’t grow up with the internet or smartphones still said mobile apps and PCs were by far the way they took care of most banking matters.

Opportunity knocks for SoFi

But Nu Holdings is putting up comparable growth numbers. What makes SoFi the better bank stock buy at this time?

It’s simple – SoFi shares are trading down 40% from their November peak, mostly due to a combination of underwhelming guidance, the diluting issuance of new shares to raise funds, and a little profit-taking.

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NASDAQ: SOFI

SoFi Technologies

Today’s Change

(1.70%) $0.31

Current Price

$18.53

Key Data Points

Market Cap

$23B

Day’s Range

$17.89 - $18.70

52wk Range

$8.60 - $32.73

Volume

38M

Avg Vol

55M

Gross Margin

61.06%

None of these issues is apt to be a long-lived burden on the stock, though. Indeed, even the fundraising via the sale of newly issued shares made sense given the stock’s lofty price at the time, and the fact is that this neobank has plenty of opportunity to do something constructive with the money.

This might help: Despite the recent weakness, the analyst community still says SoFi shares are worth $26.56 apiece. That’s nearly 40% above the ticker’s present price, which isn’t a bad way to start out a new trade.