Upstart Holdings Up 645% From December's IPO Price

Since making its public debut in December, consumer lending platform Upstart Holdings NASDAQ: UPST is up 645% from its IPO price of $20. 

The stock has already cleared two consolidations in the past six months. That’s a great sign, as it’s advisable for investors to wait until a new IPO pulls back and rebounds before making a purchase. 

In this case, you’ve had two opportunities. The stock is currently pulling back again, and may offer a buy point in the not-so-distant future. 

However, at this juncture, one caveat to any stock purchase is the broader market environment, which remains choppy. It’s best to hold off on buying essentially any stocks right now. Despite the broad market, in the form of the S&P 500, trending higher, many individual stocks are struggling to gain traction. 

As for Upstart, it’s down 8.36% this week, as shares pull back from Friday’s high of $191.89. Shares closed at $146.42 on Thursday, below their 10-day average but well above the 50-day. 

The company operates a cloud-based platform that positions itself as an “artificial intelligence (AI) lending platform designed to improve access to affordable credit while reducing the risk and costs of lending for our bank partners.”

The fintech space is clearly on fire right now. In particular, consumer lenders, which are increasingly turning to cloud-based technologies and artificial intelligence, comprise a fast-growing category.

Topping Analysts’ Views

When Upstart reported its quarterly earnings last month, earnings, the company said earnings per share were $0.22, up 340% from the year-ago quarter. That topped analysts’ expectations for $0.15 per share.

Revenue was $121.4 million, up 90% year-over-year, and ahead of analysts’ views of $116.16 million. 

Upstart also increased full-year revenue guidance to  $600 million, up 20% from the previous forecast of $500 million. That would represent year-over-year growth of 157%. 

In its earnings call, the company addressed the impact of its acquisition of Prodigy, automotive financing software. The acquisition was closed in the quarter. 

“Prodigy is like Shopify for car dealerships, helping to create the modern multichannel car-buying experience that dealerships need and consumers rightfully expect in 2021,” said CEO Dave Girouard. 

“In addition to modernizing the car-buying experience, Prodigy will allow us to bring Upstart's AI-enabled auto loans to dealerships across the country, where the vast majority of loans are transacted,” he added. “Despite potential distractions from the merger, the small but mighty Prodigy team increased our dealership footprint by 45% in the first quarter. Even at this early stage, almost $800 million in vehicles were sold through Prodigy in Q1 2021.”

Focus On Prodigy Adoption 

Chief financial officer Sanjay Datta added that Upstart is currently focused on getting the Prodigy Software adopted by auto dealers. As that footprint expanse, he said, “within that transaction volume, we have the opportunity to offer our loans. Our loans still need to compete with the rest of the marketplace, obviously.”

He noted that with auto loans, “You need to have the best prices and the highest approval rates in order to win.”  

The stock has already attracted a growing number of mutual fund buyers, with that number rising from 51 funds to 136 in the most recent quarter. An increase in institutional investment is a good sign of confidence in a stock; when you see this in a recent IPO, it bodes especially well. 

Mutual funds own 55% of Upstart shares. 

Analysts expect strong full-year earnings growth this year and next, with Wall Street pegging net income at $0.62 per share this year and $0.87 per share in 2022. Those would be increases of 464% and 40%, respectively. 

Thursday’s selloff was a decline of $6.01, or 3.94%. Trading volume was higher than average. 

While it’s wise to use caution at this point, this is a very promising stock, and deserves a place on your watch list.