Game Over for Nubank (NUBR33)? The digital bank’s app is down for the third time in a week and users revolt – for this analyst, the best thing to do is bet against the ‘roxinho’ and seek profit with the collapse of the company’s shares; understand

Things are not going well for the Nubank (NUBR33). As if all the indignation generated by the announcement that it is leaving B3 were not enough, this Wednesday (5th), the fintech again irritated its users by having “system crash”.

The problem started on Thursday (29), when users of digital banking apps, including Nubank, reported that they had problems making transfers via Pix. But today the complication has worsened: it was not even possible to open the bank’s home screen, where the balance appears.

The application is taking a long time to load and a message appears that an error has occurred. As a result, Nubank users expressed their dissatisfaction on the networks:

nubank 1
Source: Twitter
nubank 2
Source: Twitter

And then, did it give “Game Over” to Nubank? It seems that, for both users and investors, the answer is yes.

This is not me, but Felipe Miranda, CEO and chief strategist of the largest independent financial analysis house in the country. Long before Nubank announced that it was leaving B3 or having instabilities in the App, it already knew that the company was “stuck”.

The reason is that the analyst was already aware of the signs that the economic scenario has been giving since the beginning of the year. With the rapid rise of fees and inflationMiranda had already realized that Nubank would make investors – and customers – have headaches.

The reasoning is simple: Nubank launched itself in the market at a much more advantageous moment than the current one. At that time, interest rates were lower, inflation was under control and the promise of profits was good: a fintech that was willing to revolutionize the conflicting model and the very expensive fees of the “banks”.

However, the dream had an expiration date and now everyone is angry with fintech.

  • On the one hand, the users from the App suffer from instability and loss of benefits such as the daily income of the account of 100% of the CDI (which changed to 30 days);
  • On the other, the investors revolt with the devaluation of more than 54% of NUBR33 BDRs in 2022 and with the exit of B3 shares, being forced to sell or replace the shares they hold for others of a lower level, in the case of BDRs, or for shares traded on the NYSE.

But if you fall into one of these two groups, don’t worry. Felipe Miranda found a way for you to seek profit with Nubank, even if fintech is “from bad to worse” at the moment.

Felipe Miranda is convinced that the best alternative for the investor – and user – of Nubank is to bet against himself. That’s what you read: the chief strategist is recommending that you bet that the digital bank will go down on the stock market and seek profits from that.

To explain why he is recommending such an attitude, the analyst cited 3 reasons to believe that Nubank is only at the beginning of its downward trajectory. Check out:

1. 70 million customers in Latin America, but not very profitable…

The most challenging point for Nubank, at the moment, is to monetize users. To give you an idea, the digital bank currently has a customer base concentrated in the C, D and E classes. Which, in practice, means customers with little available cash.

I know you’ve probably seen the recent report that digital banking has reached the milestone of 70 million customers in Latin America, with strong participation of Brazilians. But then I ask you the following question: where is the profitability obtained from these customers?

nubank 70 million customers[[
Source: Valor Investe

In Miranda’s view, there is no point in reaching such a milestone if the quality of customers is low. Don’t get me wrong if you have a “purple” account, but the truth is that he attracted this to himself by offering no annual fee credit card and current account that yielded 100% of the CDI daily.

However, these “perks” greatly harmed fintech, which today has a revenue 14 times lower than the average of large Brazilian banks. The digital bank’s justification for such benefits is that revenue would grow as they were offered personal loans, real estate, life insurance sales and investments.

However, that is not what happened. In practice, Nubank has a large portion of customers who are suffering from high interest rates and inflation and who have had their purchasing power eroded, which made it impossible for any of these financial products mentioned to be well exploited.

2. Delinquency remains high – even if masked

As one thing leads to another, the default is also another point that plays against Nubank now. With a more difficult economic scenario, the default dynamics worsened in Brazilas happened in the crisis of 2015 and 2016.

At that time, the more experienced banks, which have been providing credit to customers for several decades, saw their default rates rise substantially. Now, if it was like that for the “old men of war”, imagine for newcomers like Nubank?

Although in the last balance sheet Nubank reported an increase of only 1% in the default rate, Miranda points out that this number was “adjusted” to look better. This is because, in the 2nd quarter of 2022, the bank changed the methodology for calculating the indicator.

If we go back to the previous methodology, we will see that the truth is that the index rose to 5.4%, which represents an increase of 2.5% in the annual comparison. And not just 1% increase, as was disclosed in the balance sheet.

That is, the Nubank had a significant worsening of delinquencycontradicting the result disclosed and celebrated by the market, according to Felipe Miranda’s analysis.

3. NUBR33 share is too expensive even though it costs R$ 4.00

Finally, Felipe Miranda sees that Nubank’s market value is exaggerated. In a report released to investors in January this year, the analyst did the math and concluded that digital banking is too expensive, even at current levels.

The “roxinho” has already lost a good part of its market value and is valued at around R$ 70 billion. But, even compared to its peers, which naturally have more extended numbers, Nubank trades at too expensive levels. And that’s why, for Miranda, the action should cost at least R$ 2.00.

Forget Nubank: it’s time to set up a short position in fintech and bet on the ‘cheapest bank in Brazil’

That’s why Felipe Miranda is recommending investors to bet against Nubank. But that’s not all: he suggests a profit-seeking combined operationalong with another bank stock that is very cheap now.

It works like this: at one end, the strategist recommends that you set up a short position in Nubank and, at the other end, buy the shares of a bank that, in his calculations, is the cheapest in Brazil today.

But what kind of bank is this?

Well, of the 5 largest banks in Brazil, 4 have shares listed on the Brazilian stock exchange. Are they: Itau (ITUB4), Bradesco (BBDC4), Bank of Brazil (BAAS3) and Santander (SANB11). As most investors already know, they are all solid businesses that tend to distribute “fat” dividends to shareholders.

But it turns out that only one of them is worth a “bargain” on the stock market and is in an excellent buying opportunity. One of the banks mentioned above is trading at a price/earnings that is roughly half that of one of the competitors. Look:

cheapest bank in brazil
Source: Empiricus Research. Data: Bloomberg

In Miranda’s calculations, the Price on Earnings (P/E) of the bank in question is 37% below its 5-year averagea discount that is not trivial and makes the present the ideal time to position yourself.

But for that, you need to access Felipe’s complete strategy walkthrough in a free report.

In this report, the strategist explains how put into practice the combined operation to seek profitswhich involves the shares of Nubank and the cheapest bank in Brazil.

It is worth mentioning that this recommendation involving Nubank and the “bancão” was made by Felipe on January 19, 2022. Those who followed the strategist’s recommendation to the letter since that date were able to capture more than 80% profit in the first 4 months of the year (January to May 2022).

Now, there is a new opportunity before you and the decision is in your hands. Are you going to stand by and look at others looking to make money from the operation or are you going to learn about Felipe’s strategy so you can get your “slice of the pie” too?

Don’t worry: access to the report is completely free, as a courtesy of Empiricus Investimentos. To consult the material, click this link and follow the step by step to read the full report.

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