JPMorgan Upgrades Upstart to Overweight, Targets 88 Dollars by 2026

JPMorgan has recently upgraded its rating for the financial technology lending platform Upstart (UPST.US) from "neutral" to "overweight," setting a target price of 88 dollars by the end of 2026. This upgrade comes in the context of a stable consumer credit environment and expectations of interest rate cuts, which are anticipated to create a favorable landscape for financial technology companies until the second half of 2025. Analysts Reginald Smith and Charles Pearce noted that the stable credit trends and potential interest rate reductions will provide a conducive environment for these companies to thrive.

Looking ahead to the second half of 2025, the analysts expect covered companies to adapt and embrace areas such as agent commerce and cryptocurrency/stablecoin, while also expanding their digital banking product offerings. The report emphasizes that in a positive macroeconomic environment, experienced financial technology lending platforms are more attractive. Upstart, with its established track record and innovative approach, is positioned to benefit significantly from this trend. The upgrade reflects a growing optimism about the risk-reward profile of Upstart, which is seen as one of the best in the sector.

Despite the upward revisions in revenue and adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) for the year, Upstart's stock performance has lagged behind the broader market. Since the release of its second-quarter financial results, the stock has declined by approximately 20%, primarily due to market concerns over its balance sheet growth and the issuance of new convertible bonds. However, the report highlights that demand from loan buyers remains robust, suggesting that the nominal loan size and profit margins still have the potential for further growth.

In contrast, JPMorgan has downgraded its rating for Kaspi.kz (KSPI.US) from "overweight" to "neutral," and for CompoSecure (CMPO.US) and Riskified (RSKD.US) from "neutral" to "underweight." The downgrade for CompoSecure is attributed to its fluctuating growth over multiple quarters and limited visibility into its full-year performance, which is heavily concentrated in the second half of the year. The current stock price is seen as already factoring in additional margin expansion and future acquisition expectations, without clear guidance from management.

For Riskified, the investment bank noted that its revenue and transaction volume growth rates have lagged behind the overall e-commerce industry and peers such as Shopify and Affirm. There is growing skepticism about Riskified's ability to achieve its adjusted EBITDA margin target of 15-20% by 2026, which could exert continuous pressure on its stock price. The bank expressed a preference for financial technology companies with more mature businesses, stronger profitability, and a diversified e-commerce presence, such as Shopify and Affirm.

Regarding Kaspi, despite its second-quarter results exceeding market expectations and driving a stock price increase of over 20%, the organic growth, excluding the Hepsi business, faces several macroeconomic and regulatory headwinds. These pressures are expected to persist at least until the end of the year. Given the opaque macroeconomic environment, the bank advised a cautious approach at current levels, awaiting a recovery in growth momentum and dividend payments before considering a more positive stance.