Upstart’s Uptrend Is Just Getting Started: Its Time to Load Up

Key Points

• Upstart had a solid year in 2024 and is on track to sustain an above-50% growth pace in 2025.
• Profits are back in the picture and driving value for investors. 
• Analysts raise targets and sentiment ratings, while institutional buying boosts a heavily shorted market. 

After years of struggling to find traction, Upstart’s NASDAQ: UPST business is moving again. Time spent focused on operations and improvement to the AI model has paid off. Now, the company is in a hyper-growth phase, expected to sustain above 50% growth in 2025, and the market for its stock is reacting favorably.

The stock price, which has also struggled with traction, is also moving higher and breaking above critical resistance targets. The outlook for 2025 now includes a stock price reversal and the potential for a long-lasting uptrend. 

Upstart Accelerates Growth in 2024; Guides for Strength in 2025

Upstart had a solid Q4, capping off a strong year with 56% revenue growth. The $218.46 million net revenue also outperformed MarketBeat’s consensus by more than 1000 basis points on increased transaction volume, conversions, and full-automated transactions. Transaction volume, the key metric, is up by 68% on a nearly 20% increase in conversions. Full-automated transactions increased to 91% of the net, up 200 basis points, and are expected to remain strong. Financial services such as loans are uniquely well-positioned for automation and AI assistance, and Upstart is the leading provider for banks and credit unions.

Margin news is mixed, but the outcome is better than analysts had hoped. The company’s contribution margin contracted but was offset by the revenue strength, producing a surprising operational profit despite another quarter of GAAP losses. The $0.26 in adjusted earnings is $0.30 better than forecasted, and GAAP profitability is expected to return by the end of F2025. 

Guidance is also good. The company forecasted $1 billion in net revenue for 2025, above the consensus forecast, adjusted profits, and at least break-even GAAP results. The balance sheet reflects the impacts of repositioning and increased loan volume but remains strong. The company’s cash position is solid and leverage low, with a total liability of about 3.75x cash and only 2x equity. 

Analysts Response Unanimous: Upstart is on Track to Drive Value

The analysts' response to the Q4 results and 2025 guidance is bullish, with 100% of the updates positive, including two upgrades and six price target revisions. The upgrades and revisions extend the trend that began in mid-2024 and provide a tailwind for the market, with sentiment firming and the price target increasing. The consensus target lags the stock price action in mid-February but is up 10% in the 24 hours since the report was released and more than 100% in the preceding 12, with the highest targets offering some upside. The opportunity is that analysts, driven by results, will continue the price target revision trend in 2025 and drive the market to new highs. 

The sell-side activity suggests that the upswing in Upstart could be vigorous. The market was nearly 20% short at the end of January, with institutions buying in bulk. Institutional buying doubles the selling, strengthening the tailwinds already in place. The question is if the shorts will reposition at higher price points, and the odds of that are low, given the outlook for revenue growth and earnings performance.

Upstart Confirms Reversal: The Next Target Is $135

Upstart’s price action confirmed the reversal that began in 2024 after the Q4 release. The market surged more than 20% to a new multi-year high, moving above critical resistance targets and setting up for a larger move. The next significant resistance target is near $135, about 40% upside from the mid-February levels, and may be reached before mid-year. If the short-covering turns into a mad dash, $135 could be reached before the start of CQ2 2025.