November 30, 2021

Upstart is a great company with a very high rating – Marseille News

There is really a lot to love Reached (NASDAQ :UPST) Stock. In fact, in April, I wrote a very bullish article on stocks, stating that the name “is a buy for growth investors” and touting the great value of the company’s highly specified artificial intelligence technology to lenders. Since the publication of my article, the shares have more than tripled.

Source: shutter

With Upstart continuing to quickly add more banks to its customer base and starting to enter the auto lending space, I’m sure it has huge room for growth. And the company’s financial results continue to be extraordinary.

Two Ways to Manage UPST Inventory

Nonetheless, given the current extremely high valuation of UPST stock, I believe stocks are likely to fall sharply even if there is a small setback in the company, the banking industry or the stock market. Therefore, I would advise investors to wait for a substantial pullback in stocks before taking a bullish position in them.

However, as an alternative approach, long-term investors might consider taking a relatively small bullish position in stocks now. In the event that there is no market or industry downturn or issues with the company, this would allow UPST stock to continue to recover.

Then, if stocks subsequently fall sharply in case of weakness, these investors could take a much larger bullish position, lowering their average costs and leaving them very well positioned.

Upstart’s booming activity and its growth prospects

In the second quarter, revenue for the AI ​​software maker climbed 60% year-on-year to $ 194 million. The company’s net income, excluding certain items, was $ 37.3 million. This compares to a loss of $ 3.7 million in the same quarter a year earlier.

“Banking partners made 286,864 loans, for a total of $ 2.80 billion, on our platform in the second quarter, up 1605% from the same quarter of the previous year,” said the company in its earnings press release. For the full year 2021, Upstart expects its sales to skyrocket 221% year-on-year to around $ 750 million.

At the end of the second quarter, the company’s customer base was only 25, giving it plenty of leeway to continue its tremendous growth. Additionally, Upstart CEO Dave Girouard, speaking on the company’s earnings conference call, noted that one of the banks that uses its platform has chosen to no longer automatically decline to ” grant loans to consumers whose credit rating has not reached a minimum level.

This information made me realize that over time banks might decide to stop using credit scores altogether and rely solely on the Upstart platform. Such a move would likely allow Upstart to raise its prices as banks would become much more dependent on the company’s platform and have excess funds as they no longer have to pay rating agencies.

Finally, Upstart entered the auto loan market this year. According to Girouard, the auto credit space is “at least 6 times larger than personal loans and at least as inefficient”. On October 6, the company announced the launch of Upstart Auto Retail software. The product uses AI to assess the creditworthiness of potential car buyers.

“With the addition of Upstart-funded loans, dealers will instantly be able to offer affordable financing to more of their customers,” said Upstart.

Going forward, Upstart has a lot of room for improvement in the personal loan and auto loan sectors.

A very high valuation

UPST stock trades at a futures price-to-sell ratio of nearly 28 times, and its futures price-to-earnings ratio is approximately 220 times. These are very high valuations. Often, stocks with high valuations end up with a sharp correction if the company’s financial results are slightly below the analysts’ average outlook.

In fact, the very high valuation of stocks has led Bank of America analyst Nat Schindler to downgrade stocks from “underperforming” to “buying.” October 18. The analyst downgraded his rating on the stock because he believes “the short-term rise in the stock is built-in,” Seeking Alpha reported.

The result on UPST Stock

Upstart has a very bright future, but stocks are expensive now. I recommend investors to use one of the two equity approaches I described above.

At the date of publication, Larry Ramer had (directly or indirectly) no position on the titles mentioned in this article.

Larry Ramer has researched and written articles on US equities for 13 years. He was employed by The Fly and Israel’s largest business newspaper, Globes. Larry began writing articles for InvestorPlace in 2015. Some of his highly successful contrarian picks include GE, Solar Stocks, and Snap. You can reach him on StockTwits at @larryramer.