Upstart Holdings (UPST) Stock

Zacks.com users have recently been watching Upstart (UPST) quite a bit. Thus, it is worth knowing the facts that could determine the stock's prospects.

Thanks to financial performance that appears to be stabilizing, shares of Upstart (UPST -1.27%) are on the upswing. In the past six months, they have soared 200% (as of Nov. 22), trouncing the 13% total return of the S&P 500 index during the same period.

In this episode of After Earnings, Ann speaks with Upstart CEO and co-founder Dave Girouard about how the company uses AI to assess creditworthiness. Dave shares insights on the limitations of FICO scores, Upstart's data points, recent earnings, and growth strategies.

Upstart (UPST) has been upgraded to a Zacks Rank #2 (Buy), reflecting growing optimism about the company's earnings prospects. This might drive the stock higher in the near term.

Upstart reported a strong quarter, but there's more to the story.

Upstart's Q3 earnings exceeded expectations, driven by strong demand for personal and auto loans, resulting in a 46% surge in share price and a $2.2B market cap increase. The fintech's revenue grew 27% quarter-over-quarter, with decent improvements in key metrics like conversion rates and automated credit decisions. Despite a positive outlook for Q4 and favorable interest rate conditions, Upstart's valuation has become too high, prompting me to take profits.

Upstart Holdings has shown improved operating momentum in Q3, with a 43% increase in lending volume and positive adjusted EBITDA, but remains a risky investment. The company's AI lending models are still in a validation phase and have not been tested in an economic recession, raising concerns about long-term sustainability. Upstart's reliance on funding partners and high EV/revenue multiple (10x) compared to peers (3.4x) suggests its current valuation may be overvalued.

Although the revenue and EPS for Upstart (UPST) give a sense of how its business performed in the quarter ended September 2024, it might be worth considering how some key metrics compare with Wall Street estimates and the year-ago numbers.

Analysts say the AI lender is on a better track is it benefits from an improved interest-rate climate, funding partnerships and “solid” credit trends.