Is Upstart Holdings stock $UPST a good investment?
Stock Name and Stock Trading Platform
Upstart Holdings, Inc. UPST – NASDAQ
The Stock Sector
Upstart is an American FinTech AI lending platform that was founded in 2012, by two former Google executives and a Thiel Fellow.
The primary idea was to link entrepreneurs. It later gravitated to online financial lending, with a mission of enabling effortless credit, based on true risk.
This was based on the realization that only a limited number of people have access to financial credit, despite never having defaulted on any loans.
The financial models used by banks are very risk-averse. They are not very inclusive of personal loans. Upstart have partnered with banks, rather than competing with them, so as to provide personal loans via AI-based models.
These AI systems beat the FICO model and so enables more people to qualify for loans. The range of financial related loans and services include:-
- credit card consolidation,
- medical loans,
- student loans,
- and even wedding loans.
Recent News on Upstart
Upstart has gained recognition on the stock markets over the past year, and is regarded as a hypergrowth stock. Upstart went public in December 2020, at $20 offering of 2 million shares of its common stock.
Upstart has been on a wild ride since its IPO, in both upwards and downwards directions. It has generally maintained upward mobility, with unbelievable upswings of above 1,100% in months.
Upstart is currently ranked as one of the fastest-growing stocks on the stock market.
These unprecedented moves have caught the curiosity of many investors who have jumped in on this rollercoaster.
Stock pick analysts have opted for caution, as some stock market and stocks and shares experts, believe Upstart is overvalued by all its metrics.
The Upstart stock has recently launched a New-Mobile first auto retail online platform.
This will improve the user experience and introduces new features.
These new designs include,
- Mobile first,
- browse mode,
- improved purchase flow, and others. This could boost the performance of the $UPST stock share price. In this respect, the Upstart Holdings stock $UPST could be a good investment at this time.
Current Position of Upstart
Upstart is looking very impressive at this point in time (21 March 2022) with all of their performance metrics up by triple or even quadruple digits.
It has been backed by renowned serial investors like,
- Mark Cuban,
- Peter Thiel, and
- Eric Schmidt among others.
Upstart has made strides in automotive financial lending to spread its interests.
$UPST holds the following subsidiaries,
- Prodigy Software Inc,
- Upstart Network Inc,
- Upstart Holdings, Inc,
- Asset Management Arm.
Upstart has done remarkably well, and has announced a $400M buyback. It released its last quarterly earnings last month on 14 February 2022. It reported an EPS of $0.89 shaming the expected $0.51.
Upstart has a P/E ratio of 89.0 and earnings are estimated to grow by 44% in the next year.
Upstart recorded annual revenue at $305.33M in December 2021, a surge of 247.82%. The market capitalization stands at $10B, an enormous value indeed for a company that is only 1 year old in the equities stock market.
Upstart employs more than 500 workers.
Upstart utilizes some interesting mechanics in its operations. They essentially provide financial banks with a better assessment method on financial loans.
Banks limit a lot of access to capital with their conventional analysis. Upstart has direct partner channels with the banks, and therefore evaluates financial loans for potential borrowers who have not signed up to its website.
This has hedged the risk for Upstart, as it is the bank’s money being loaned to people, and Upstart receive commissions for their services.
Upstart currently has a 70% loan approval and fully automated loans with no document uploads, calls, or waiting.
Upstart has a huge market for lending, and anticipates continued money lending growth in the future.
The market share for unsecured personal loans is still not fully tapped. Upstart rivals in the space include,
- SOFI Technologies (NASDAQ: SOFI) and
- Lending Club (NYSE: LC).
Upstart by far leads in the Fintech sector among its competitors. Many investing experts have, however argued that Upstart faces serious concentration risk as it specializes in the only sector and has Near-prime as its core customer.
Cross Riverbank also finances 80% of the loans that Upstart approves. Half of the traffic in Upstart comes from one site called Credit Karma.
In case anything goes south in this partnership, Upstart could face a serious blow. And such a hit may be its downfall. And such doom has cast shadows over several other such companies.
UPST Stock Price Chart
$UPST closed at $125.47 a share on 18 March 2022, an increase of 7.63% from its previous market close. This looks good for Upstart. It is still trading below its all-time highs experienced in the year.
The volume of shares of UPST is now at around 13.03 million. It is highly volatile, and while fortunes have been made, they have been equally lost.
Its 52-Week high was $401.49 per share and it traded at a 52-week low of $75.15. It has traded at a day range of between $113 – $126.35 per share.
$UPST is up +28% in the past 5 days, +4.1% up in the past month, and +0.15% over the year. It is however down by-57.245 in the past 6 months when it was at its exploding highs in terms of its share price.
Analysts believe that the UPST stock is overvalued and will likely tank in the future.
Upstart has been a great return for investors. Although it might be at peal levels right now owing to the market bubble. It has been a great long-term investment, witnessing a meteoric growth of +184% over five years.
Profits for UPST
UPST has defied the conventional status quo for new start-ups by posting rising profits in its first year of operation.
Upstart is truly a rarity, and this has been mirrored in the astronomical rises investors have witnessed. Capital goes where it is rapidly returned, and many rushed to capitalize on its IPO.
Many newbies have joined in on the home run sending the Upstart stock soaring.
The net income was at $58.94M in December 2021, a staggering +5,639 % rise over the year. The net profit margin was +19.31% and this too was an exponential rise by +1,550% over the year.
Operating income stood at $60.89M up by +431% over the year. UPST had about $986.61M in cash, and equivalents, an increase of +293% over the year.
The cost of revenue was recorded at 41.05 million, 220.97% in the green.
However net change in cash was down -90.29%, recorded at 19.48 million, this is an indication of negative free cash flow which raises a red flag for conservative traders.
Sentiment on UPST
Insiders in UPST assure investors and prospective investors, that they are doing great. This to justify the phenomenal growth. Even though the good run in the share price, witnessed so far, is eye-watering. It is best to be cautiously optimistic about Upstart.
Buying at the top of a bull run is a good way to get crushed and UPST, given this stock could be at terminal levels at the moment, and preparing for a one almighty crash in its share price.
Many investors also believe that Upstarts fundamental models are flawed. Although it has increased credit access to several people, the risk of default by uncreditworthy borrowers still exists.
Upstart is also subject to forces of the market, such as,
- Inflationary pressure,
- Hiking interest rates, and
- unemployment among many others. In an economic crisis, it could face a supernova hit.
Concerns have been raised about Upstart’s exorbitant interest rates. The Annual Percentage Rate (APR) is over 25% which some consider a rip-off.
Sceptics also doubt whether the company is more about finance than Tech. And if any special AI analysis is even conducted at all.
Future of UPST
Upstart is currently the leading fintech lender in the U.S. They will not be shaken easily out of their position at the moment.
The financial sector has seen a lot of disruption of late, as many emerging technologies aim to unseat the incumbent obsolete giants.
Major developments in decentralized finance and the now popular cryptocurrencies threaten the existence of centralized platforms controlled by a few board members.
Upstart has a bright future in the long-term, as lending is an essential service that will always be required. If Upstart weather the uncertainties that lie ahead, they could secure themselves a dominant position in the financial industry.
The backing of many institutional investors like,
- hedge funds,
- mutual funds,
- and other mega players will serve them well. They make up over 60% of its stakeholders.
$UPST will have to leverage more technologies and diversify their interest to be sustainable in the long run.
Crypto lending will be a major rival to UPST as it promises anonymity.
Overall verdict on UPST
Upstart can be logically assessed to be bearish in the short-term. This can be validated by the levels of insider selling that has been witnessed.
Upstart are reaping their profits of the ship heading for a tempest. Insiders have dumped a total of $1.8B worth of shares in this stock. Which could be a telling sign of future uncertainty.
Moving averages suggest a buy for UPST, but Oscillators are neutral. Call and put options are the way to go regarding this UPST stock.
Shorting UPST at the appropriate time could also pay off, as a massive deleverage occurs.
UPST is a big hype, and this reality will eventually catch on in the stock market. The prices that have been witnessed thus far, could well be the best investors see in a long time.
Due diligence is still encouraged and those who hold on to Upstart, and investors will have to be willing to stomach heavy volatility. Is Upstart Holdings stock $UPST a good investment? I’m not sure.
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