It has been a wild ride for Upstart (NASDAQ:UPST) over the past year. Going public in late 2020, the fintech play became one of the hottest stocks around. Thanks to excitement over its high revenue growth, and potential to “disrupt” the lending world, UPST stock went from around $50 per share in early 2021 to as much as $401.49 per share.
But as we’ve seen since the fall, the market has become increasingly skittish about growth stories. With all the uncertainty out there, market sentiment for richly priced tech stocks have moved sharply in the other direction.
That has been bad news for more established tech names. It’s even worse for more volatile names like this one. Since briefly popping above $400 per share, it has since experienced a more than 61% decline in price.
However, it’s important to keep a few things in mind. For one, as we saw play out in the last trading days of 2021, the dust has settled on the Upstart selloff. Shares have found a floor at or near today’s prices.
More importantly, the “story” behind this company remains unchanged. Its continued strong underlying performance could enable it to bounce back.
UPST Stock at a Glance
In case you aren’t familiar, here’s a brief overview of Upstart Holdings. Founded in 2012, this financial technology company is on a mission to revolutionize how lending institutions determine credit worthiness. While technology has disrupted other areas of finance in recent years, when it comes to borrowing money for a car or a new home, things have largely stayed the same. One’s credit worthiness is determined largely by credit reports and FICO scores.
Upstart, however, has built a better mousetrap as it were. With its artificial intelligence (AI) powered prediction model, its platform takes other variables into account. This platform enables more borrowers to obtain loans, while simultaneously enabling the company’s partners (banks, credit unions, etc.) to minimize loan losses and reduce their loan origination costs.
It’s an understatement to say that this innovative cloud-based service has become a hit. Despite its name, this “disruptor” is no longer an upstart. Generating revenue of $227.6 million in 2020, analysts call for its 2021 revenue to be more than 3.5x that amount ($806.7 million). With this, the strong performance of UPST stock in 2021 was not surprising.
As the market has soured on growth stocks, investors have forgotten about this. But despite concerns that names like this, still sporting premium valuation, have more room to fall, it still has potential to make a big comeback throughout 2022.
The Story Still Stands With Upstart
Given its sharp losses, I can see you may be fearful of diving into UPST stock today. Even as the dust has settled, you may be concerned that, with the aforementioned uncertainties, another round of losses awaits. However, there are factors that point to it moving back higher as the new year unfolds.
First, last month’s wave of tax-loss harvesting has passed. The start of a new month also marks inflows of new capital into the market, another positive for fundamentally superior stocks like this one. Second, like I mentioned above, the “story” behind this company remains in play.
As seen in its most recent earnings report, Upstart has continued to grow at a rapid clip. For the quarter ending September 30, 2021, revenue grew 250% year-over-year, to $228 million. Net income more than doubled compared to the prior year’s quarter, from $12.2 million to $28.6 million. CEO Dave Girouard also noted in the earnings release that the company has seen the number of banks, credit unions and auto dealers that use its platform triple in the past year.
Now, I wouldn’t buy Upstart on the expectation it’s going to continue seeing 250% year-over-year growth. But per sell-side consensus, revenue is expected to come in at between $1.13 billion and $1.36 billion in 2022. Based on its upping of guidance, it has a strong chance of hitting the high end of these estimates. As subsequent results show that the story still stands and Upstart shares have a path to recover from their recent losses.
The Verdict on UPST Stock
Earning an “A” rating in my Portfolio Grader, Upstart was one of many tech stocks unfairly knocked lower by the sentiment for tech stocks making a dramatic shift in the other direction.
However, as this stabilizes, and as the lending industry continues to move to its innovative platform? Even as top-line growth slows down, it’ll still come in at a pace that justifies a rebound for its stock price.
As it finds a floor at around $150 per share, now’s the time to buy UPST stock.
— Louis Navellier and the InvestorPlace Research Staff
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Source: Investor Place