Is Upstart Stock a Buy Now?

Upstart Holdings, Inc. (UPST) has been on a rollercoaster ride since its IPO in 2020, with its stock price soaring to an all-time high of $401.49 in October 2021 before plummeting to a low of $11.35 in March 2023. The fintech lender's stock has since rebounded, gaining 244% since mid-2024, driven by a series of strong earnings reports that have exceeded analysts' expectations. But the question remains: is Upstart stock a buy now?



Upstart's AI advantage
Upstart's AI-driven underwriting model is a key differentiator that sets it apart from competitors. By considering more than 2,500 variables, the platform can more accurately predict repayment rates and underlying risk, leading to improved conversion rates and a scalable ecosystem that generates fees as core income. In the fourth quarter of 2024, Upstart's conversion rate increased to 19.3% from 11.6% in the prior-year quarter, demonstrating the strength of its AI-driven approach.

Expansion into new lending verticals
Upstart's growth strategy involves expanding into new lending verticals, such as auto loans and home equity lines of credit (HELOC). By diversifying its loan offerings, Upstart aims to tap into larger markets and reduce its dependence on the personal loan segment. In the fourth quarter of 2024, Upstart originated 1,715 auto loans with a total principal of $43 million, more than triple the volume of auto loans in the fourth quarter of 2023. Similarly, the HELOC business launched in November 2023 and grew by 59% sequentially in the fourth quarter, indicating strong demand for these new products.



Financial performance and valuation
Upstart's financial performance has been strong, with revenue growing by 56% year over year in the fourth quarter of 2024. The company's adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) margin improved to about 13% in the quarter, and its net loss narrowed to $2.8 million from $42.4 million a year ago. Upstart's guidance for at least a break-even net income for 2025 highlights a rapidly improving outlook.



Upstart's forward price-to-earnings (P/E) ratio is 50.68, which can be considered high but may be justified by the company's growth prospects. Analysts have a consensus "Buy" rating on the stock, with a 12-month price target of $72.25, indicating a 0.67% increase from the latest price of $71.77.



Is Upstart stock a buy now?
Upstart's AI-driven lending platform, expansion into new lending verticals, and strong financial performance make a compelling case for investing in the company. However, the high forward P/E ratio and the competitive landscape in the fintech lending segment should be considered before making a decision. As always, it's essential to do your own research and consider your risk tolerance before investing in any stock.

In conclusion, Upstart stock is an attractive option for investors looking to capitalize on the growth of AI-driven fintech lending platforms. With its strong financial performance, expansion into new lending verticals, and AI-driven underwriting model, Upstart is well-positioned to continue its growth trajectory. However, investors should be aware of the competitive landscape and the company's high forward P/E ratio before making a decision. As always, it's crucial to do your own research and consider your risk tolerance before investing in any stock.