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Upstart's Supercharged Stock: To Buy or Not?

Eli GrantWednesday, Nov 27, 2024 6:30 am ET
3min read
Upstart(UPST -1.27%) has soared 200% in the past six months, leaving many investors wondering if it's still a bargain. The fintech company's stock surged after two consecutive quarters of well-received financial updates, with revenue up 20% year over year and a net loss per share of $0.07, better than analyst estimates. However, shares have since pulled back 18% from their recent high. Let's dive into Upstart's recent performance, potential risks, and challenges to determine if it's still a buy.

Upstart's AI-driven lending platform has been a significant driver of its revenue growth and stock price appreciation. The company's ability to leverage AI for better risk assessment and lower borrowing costs has positioned it as a leader in the online lending space. However, investors should be aware of several factors that could impact Upstart's future performance and stock price trajectory.

Firstly, Upstart's recent growth is partly due to easy comparisons, as sales fell 14% in the year-ago period. The company will face tougher comparisons in the coming quarters, which could slow down its growth rate. Additionally, Upstart is not yet profitable, reporting a total net loss of $126 million through the first nine months of 2024. While its recent quarterly net loss of $7 million was an improvement, the company still needs to prove it can consistently generate positive earnings.

Another concern is Upstart's sensitivity to macroeconomic forces. The company thrived in 2020 and 2021 but struggled in subsequent years as economic conditions deteriorated. If the macroeconomic environment takes a turn for the worse again, Upstart could face significant headwinds.

Lastly, shares of Upstart trade at a high valuation, with a price-to-sales ratio of 11.8, above their historical average. While the current valuation may reflect the company's strong performance, it also means there is less margin for error if the company's growth slows or stumbles.

In conclusion, while Upstart's recent performance has been impressive, investors should be aware of the potential risks and challenges that lie ahead. The company will need to continue delivering strong results and prove its long-term profitability to justify its high valuation. Nevertheless, Upstart's AI-driven lending platform and strong financial performance could make it an attractive long-term investment for those willing to take on the risks.

Upstart's stock price performance over the past year can be seen in the table below:
UPST Trend

As investors consider whether Upstart is still a buy, it's essential to evaluate the company's potential risks and challenges. Although Upstart has shown impressive growth, investors should be cautious and consider the potential impact of these risks on Upstart's future performance. If the company can demonstrate consistent growth and profitability, investors may find the stock an attractive long-term buy. However, investors should be prepared for potential pullbacks or market corrections.

Ultimately, the decision to invest in Upstart will depend on individual investors' risk tolerance and investment goals. While Upstart's recent performance has been encouraging, investors should weigh the potential risks and challenges before making a decision.
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serkankster
11/27
AI lending game strong, but watch those valuations
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statisticalwizard
11/27
AI-driven lending is 🔥, but those valuations feel spicy. 🤔 Maybe a hold for me until it cools down a bit.
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stocksandreales
11/27
Valuation feels stretched, but potential's there. 🤔
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West-Bodybuilder-867
11/27
Easy comps fade, growth might slow soon
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Liteboyy
11/27
Holding $UPST long-term, betting on AI disruption
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abdul10000
11/27
$UPST growth looks juicy, but risks lurk beneath
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RedDogT3
11/27
Valuation feels a tad spicy. Might nibble on dips, but not going all-in yet.
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Still_Air2415
11/27
Macro headwinds could hit hard, diversify your portfolio
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throwaway0203949
11/27
Tough comps ahead, but AI-driven lending is 🔥. Holding $UPST long-term, but keeping an eye on those valuations.
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Disclaimer: the above is a summary showing certain market information. AInvest is not responsible for any data errors, omissions or other information that may be displayed incorrectly as the data is derived from a third party source. Communications displaying market prices, data and other information available in this post are meant for informational purposes only and are not intended as an offer or solicitation for the purchase or sale of any security. Please do your own research when investing. All investments involve risk and the past performance of a security, or financial product does not guarantee future results or returns. Keep in mind that while diversification may help spread risk, it does not assure a profit, or protect against loss in a down market.
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