Could October be a breakout month for the stock market this year? The S&P 500 is up about 20% year to date, and lower interest rates might lead to substantial financial activity. Financial companies will begin to report third-quarter earnings in a few days, and positive news may send them skyrocketing.
If you're looking for a great growth stock, Redfin(NASDAQ: RDFN) and Nu Holdings(NYSE: NU) are two great candidates to buy right now.
Redfin is back in growth mode
Redfin is a real estate technology company offering an online marketplace, live agents, data-powered analysis, and even mortgages. It's the top-visited brokerage company, with nearly 50 million average monthly visits, or five times as much as the nearest brokerage competitor.
This is a great setup for a business today, disrupting traditional real estate with digital features that kick it up a notch. However, since real estate has been down in the dumps, Redfin's performance is under pressure. Revenue fell 9% year over year in 2023. But that was then, and revenue rose 7% year over year in the 2024 second quarter.
The market noticed the strong performance despite the unfavorable operating environment, and it's getting excited about the possibilities associated with lower interest rates. Redfin stock is up almost 110% during the past three months.
Redfin is still an upstart, though, and it's not profitable. Its net loss improved from $321 million to $130 million in 2023 but deepened in the 2024 second quarter. It's expecting a loss of about $26 million in the third quarter, worse than last year's $19 million.
Wall Street analysts are forecasting a loss into 2025, although smaller than this year. Management said it would break even with adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) for the full year, and that was before the Federal Reserve lowered interest rates.
In other words, it's already improving and gaining momentum, and the industry hasn't even started to turn around. According to Redfin's own data, median home prices rose 3.2% in August, and home sales fell 5.9%. But things are going to start changing, and although there's plenty of risk here, Redfin could be a blowout stock as it benefits from its own strong business backed up by economic tailwinds.
Nu is a screaming buy any time
If you're looking for a growth stock with huge opportunities and sustainable profitability, Nu is your candidate. It's a no-brainer stock to buy at any time, and with earnings data coming later this month, now is as good a time as any to buy before it climbs further.
Nu offers digital financial services to consumers in Brazil, Mexico, and Colombia. It's based in Brazil, where it's been operating longest and has a strong foothold. It's the largest country in Latin America, and 56% of the adult population is already on its platform, but it continues to add millions annually.
It's not anywhere near done there. Besides the new customers flocking to its platform, it's generating increased engagement at high rates. One of Nu's top-line measures is average revenue per active customer (ARPAC), and it's an important piece of its results. Its strategy involves getting satisfied customers to add more products and engage at higher rates, which leads to higher ARPAC. This measure increased 30% year over year to $11.20 in the second quarter.
Nu is still a small player in Mexico and Colombia, where it's also still a new player. But customers are joining these markets at a faster pace than in Brazil, and there's a long growth runway as it settles in.
Along with offering high-yield savings accounts, Nu now has a complete digital app with investment and insurance products. It has also developed a robust, high-performing credit business that includes credit cards and loans.
The results are in, and they continue to be stellar. Revenue increased 65% year over year to $2.8 billion in the second quarter, and net income was $487 million, a 116% increase year over year.
Expect Nu, which happens to be a stock that Warren Buffett owns, to jump on positive earnings, but buy it for its huge long-term potential.
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Jennifer Saibil has positions in Nu Holdings. The Motley Fool has positions in and recommends Redfin. The Motley Fool recommends Nu Holdings. The Motley Fool has a disclosure policy.
