Upstart Stock’s Bull Case Just Got a Lot Stronger

Key Points

• Today's economy is set up to benefit a stock like Upstart, giving its business model all the right reasons to raise the stock's price.
• Financial growth and rapid adoption suggest there is still a chance for investors to see a bull case. 
• Wall Street sees double-digit upside, enticing institutions to buy in.

The stock market has probably shaken out some investors with its recent swings in the S&P 500 index. This new volatility period has been born of President Trump's implemented trade tariffs on most of the United States' trading partners. As clear as these swings are, the effects of this uncertainty on the technology sector, specifically, have left most investors confused and worried about where their capital could be best invested moving forward.

With this in mind, most participants are concentrated in the market's semiconductor and artificial intelligence sectors, potentially leaving behind other worthy companies that could bring even more attractive upside potential. This is where shares of Upstart Holdings Inc. NASDAQ: UPST come into play in this current environment, not only due to its potential catch-up to the rest of the technology sector but also due to its business model itself.

The way consumer credit is set up in the United States today presents a tremendous opportunity. This makes Upstart’s offerings all the more attractive to the average consumer, who is likely worried about potentially additional inflation as a result of these new tariff rates being implemented across the economy. In a very subtle way, the market is already starting to see Upstart stock through this lens.

Why Upstart Could Outperform This Market

Most consumers now hold a growing base of credit card debt, not to mention auto and home loans, which might have been mistimed during the high-interest rate environment of the past couple of years. These consumers have probably received an Upstart letter in the mail or at least know someone who did in this regard.

Upstart’s underlying system thrives because it connects borrowers who are paying a high interest rate on older loans and allows them to either refinance those loans at a lower rate or offer a lower-interest personal loan to clear higher-interest loans out of the way.

Upstart is offering a helping hand to millions of Americans who have seen their budgets squeezed by the headwinds of inflation, a service that will likely come in high demand in the months ahead. That being said, there are some numbers to back up this theme.

Before investors dig into these performance indicators, however, they need to understand one key factor in Upstart’s business. According to the latest investor presentation, the company claims that 92% of all loans are now fully automated by its machine learning models, which has a significant implication for profitability.

By eliminating the need to incur overhead, Upstart can continue to originate loans that align with its models on autopilot, and that is something investors should look for in this market: high margins and ongoing free cash flow to drive the stock’s valuation.

Financials Drive Upside for Upstart

Within the same investor presentation, Upstart boasts that up to $2 billion worth of loan originations were made in the first quarter of 2025, a figure that grew by 83% compared to the same quarter in 2024. With this in mind, investors shouldn’t be surprised to see up to 67% revenue growth over the year as well.

Reaching up to $213 million in revenues puts Upstart outside of the “proof of concept” phase and into an area where further adoption and market share can drive financials into a new scale, which can quickly spill over to the stock’s price as well.

Seeing the writing on the wall, some institutional investors decided to get in on this potential ride before it became obvious to everyone else. Allocators from the Vanguard Group agreed to boost their holdings in Upstart stock by 2.8% as of early May 2025, bringing their net position to a high of $368.9 million today.

This makes Vanguard an 8.4% owner of Upstart, which provides not only institutional backing but also the opportunity for stewardship as the company seeks to scale new heights in its industry. These buyers weren’t the only ones on Wall Street willing to make their bullish cases for Upstart public, though.

K. Peterson from Needham & Company reiterated his Buy rating for Upstart stock during mid-May 2025, this time placing a valuation of up to $70 per share on it as well. Compared to today’s prices, this view calls for up to 21% upside potential for investors to consider in their portfolios.

Finally, markets agree with this view overall, and that’s why they are willing to pay up to 8.6x on a price-to-book (P/B) basis, a significant premium to the credit industry’s average valuation of only 3.2x. There is always a good reason for the market to pay up on good growth stories, and Upstart seems to justify that decision in most, if not all, ways.