Will the stock price stabilize?

Upstart Stock Forecast: Will the Stock Price Level Off? – Photo: Shutterstock

Upstart Holdings (UPST) is an artificial intelligence (AI)-based lending platform that seeks to disrupt traditional credit score lending models.

Upstart’s platform uses machine learning to identify risk and aims to improve access to affordable credit for borrowers while reducing the risk and cost of lending for its banking partners.

Upstart shares came to market in December 2020 at $20 per share and had climbed to $390 by October 2021, an increase of 1,850%. But that bull run quickly came to an end and the stock currently (April 5) sits around $112.

In February 2022, Upstart announced an ambitious share buyback program. Since then, the price has fluctuated wildly between a high of $160 and a low of $85.

Will that be enough to stabilize the stock price over the medium term, and what will shape the outlook for Upstart Holdings (UPST) stock?

Upstart Stock Analysis

Upstart stock hit the market on December 16, 2020 at an opening price of $20 per share. The stock rose 50% on the first day of trading, closing at $29.47. This growth continued, and as of February 1, 2021, the stock price stood at $62.19, a 211% increase from its initial public offering (IPO) level.

The stock price rose during the spring and entered a bull run in late June 2021, when it rose from around $120 to an all-time high of $390 on October 15. The stock was bolstered during this period by several banks launching personal lending platforms powered by Upstart, and the strong second quarter results announced on August 10, 2021.

Upstart’s stock price has had a winter of discontent and fell to $90.13 on January 28, 2022, down 77% from its October high. The bear run was triggered by the mixed third quarter results announced on November 10, 2021.

Although the headlines were good, investors were disappointed with the revenue guidance released for the upcoming quarter: Upstart reported year-over-year revenue growth of more than 1,000% in the second quarter 2021. That figure had fallen to 200% for the third quarter, and the company issued a forecast equivalent to ‘only’ 200% revenue growth for the fourth quarter.

Upstart Stock Chart Since IPO, 2020 - 2022

Despite this bumpy ride, Upstart has seen strong share price growth during 2021, which Daniel Loeb, managing director of Third Point, a New York-based asset management firm, pointed out in his letter. to investors in the fourth quarter of 2021:

“Our biggest loser in the quarter, Upstart, was down 52% but remained our biggest gainer for the year and in our company’s history, up a remarkable 271% over the 12-month period,” said he wrote.

In Upstart’s latest news, the company announced its fourth quarter and full year results, as well as a share buyback program. The market reacted favorably to the news and the stock price rose from $104.60 to $148.60 at the end of the day on February 16.

In terms of technical analysis for Upstart stock, the Relative Strength Index (RSI) was 50.42 at the time of writing (April 5). This is considered neutral and did not signal that the action was due to a price correction.

Results update

Upstart announced its fourth quarter and full year 2021 results on February 15, 2022. Total fourth quarter revenue increased 252% year-over-year, beating expectations. Earnings per share (EPS) of $0.89 also beat analysts’ expectations of $0.51 EPS.

Upstart reported total revenue of $849 million for 2021, a 264% increase over 2020 levels. Banking partners issued 1.3 million loans during the year, up by 338% compared to 2020, and operating revenue soared to $141 million, compared to $11.8 million the previous year.

“With triple-digit growth and record earnings, the fourth quarter was a stellar end to Upstart. 2021 will be remembered as the year AI lending came to the fore, kicking off sending off the most impactful credit transformation in decades,” said co-founder and CEO Dave Girouard.

Share purchase program

The company also announced a share buyback program, intended to stabilize the share price.

Upstart is now allowed to repurchase up to $400 million of common stock and will seek to rush on what it considers to be “attractive buying terms” – buying when the stock price is low and rising demand in hopes of ending a bearish run.

“With the volatility in our stock trading, we have seen what we believe to be attractive buying conditions at various times over the past year, and our profitability puts us in a position to be able to launch this program and take advantage of these situations on behalf of our shareholders,” Upstart Chief Financial Officer Sanjay Datta said in a statement.

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More credit flavors

In February 2022, CEO Girouard said, “We believe in our hearts that AI lending is not a one-category phenomenon, but will eventually transform virtually every flavor of credit” and the fourth quarter of 2021 saw Upstart do rapid progress in several new product categories, including small business and mortgages.

Upstart has also made tremendous strides in its vehicle refinance business and has begun to expand vehicle lending on the Upstart platform. The company says it’s “confident we’re in a class of its own” and expects $1.5 billion in auto loan transactions on its platform in 2022.

Challenging lending environment

Yet just as Upstart turns to more “credit flavors,” the lending outlook is starting to look more hostile.

High inflation in the United States is increasing the cost of living and this should be accompanied by interest rate hikes. This combination could leave Upstart customers struggling to cope with refunds.

Upstart’s latest SEC filing explained that “higher interest rates often lead to higher payment obligations, which can reduce the ability of individual borrowers to meet their obligations and therefore lead to increased delinquencies.” , defaults, customer bankruptcies and write-offs, and reduced recoveries, all of which could have a material adverse effect on our business.”

UPSSTART Inventory Forecast for 2022

As of April 5, 2022, analysts have rated Upstart stock as a consensus “buy.” According to data from MarketBeat, Upstart stock had seven buy, three hold and one sell rating. The average price target for Upstart stock was $220.55, up 94% from the stock price at the time of writing. Analyst price targets ranged from a low of $75 to a high of $350.

Citigroup’s Peter Christiansen was bullish on the stock in December, upgrading his rating from neutral to long on December 3, 2021. His Upstart price target of $350 remained the stock’s highest price target and represented a 97.7% increase over the share price on the date of the report. .

A few days later, Morgan Stanley initiated a hedge on the stock, issuing an equal weight rating. His $200 UPST price target also represented a more bearish 2.9% upside to the stock price as of the report date (December 9). Wedbush’s David Chiaverini reiterated his neutral rating on Upstart on January 21, 2022 and lowered his price target from $160 to $110.

Upstart announced fourth-quarter and full-year results on Feb. 15, and while that heralded a flurry of analyst activity, there was little consensus. Barclays analysts were bearish on the stock, lowering their price target from $285 to $180 on Feb. 17, a decline of 37%. Ronald Josey of JMP Securities issued an outperform rating for the stock on Feb. 16, but also lowered his price target from $315 to $245.

Bank of America analysts were more bullish, taking the stock from underperforming to buy on Feb. 17 and posting a price target of $255, up 72.3% from share price on the date of the report. Piper Sandler analysts were also bullish on the stock, issuing an overweight rating on Feb. 16 and raising their price target from $223 to $230, a 110.8% upside from the stock price. action on the date of the report.

It should be noted that analysts’ predictions are often wrong and forecasts are not a substitute for your own research. Always do your own due diligence before investing. And never invest or trade money you can’t afford to lose.

Start-up inventory forecast: around 2030

Looking further ahead, algorithm-based forecasting service WalletInvestor rated Upstart as a “tremendous long-term investment” at the time of writing (February 28).

WalletInvestor’s Upstart stock price prediction predicts the price to rise to $203.5 by April 2023, $283.2 by April 2024, $361 by April 2025, and $440 by April 2026. WalletInvestor’s five-year forecast generated an Upstart stock price forecast of $522 for February 2027.

Note that price predictions based on algorithms can be wrong. Forecasts should not replace your own research. Always do your own due diligence before investing. And never invest or trade money you can’t afford to lose.

FAQs

Action Upstart: buy, sell or hold? As of April 5, 2022, analysts have rated Upstart stock as a consensus buy. According to MarketBeat data, the stock had seven buy ratings, three hold ratings and one sell rating.

Algorithmic forecasting service WalletInvestor called the stock a “great long-term investment.”

It should be noted that analysts’ predictions are often wrong and forecasts are not a substitute for your own research. Always do your own due diligence before investing, always spread the risk, and never put your entire investment in just one or two stocks – and never invest or trade money you can’t afford to lose .

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Karen J. Nelson