Upstart and Walmart’s OneProgress: A Strategic Alliance to Watch, But How Soon Will It Pay Off?

The partnership between Upstart Holdings (NASDAQ: UPST) and OneProgress Services LLC—a Walmart majority-owned financial services firm—marks a pivotal moment in the fintech-lending space. Announced in early 2025 via an SEC filing, the collaboration aims to expand Upstart’s reach through Walmart’s vast customer base, leveraging co-branded marketing campaigns. While the deal’s immediate financial impact is muted, its long-term potential hinges on Upstart’s ability to navigate macroeconomic risks and execute on its AI-driven growth strategy.

Strategic Imperatives: Why This Partnership Matters

Upstart’s core business relies on partnerships with financial institutions to originate loans using its AI-driven underwriting models. By teaming with OneProgress, Upstart gains access to Walmart’s 140 million U.S. shoppers—a demographic that includes underserved borrowers who may not qualify for traditional credit products. The partnership’s focus on direct mail campaigns and co-branded offers aligns with a broader industry trend: fintech firms like Upstart, Chime, and Plaid are increasingly partnering with retail giants to tap into their customer networks.

However, the alliance’s near-term financial upside is tempered by cautious guidance. Upstart explicitly stated the deal won’t materially affect its 2025 results, a reflection of its already robust growth trajectory. Let’s unpack the numbers:

Upstart’s revenue surged 56% YoY to $219 million in Q4 2024, driven by a 68% increase in loan origination volume. This momentum suggests the partnership could amplify growth in 2026 and beyond.

The Financial Crossroads: Growth vs. Profitability

While Upstart’s top-line expansion is impressive, profitability remains a hurdle. The company reported a $2.8 million GAAP net loss in Q4 2024, despite positive Adjusted EBITDA of $39 million. Margins face pressure from flat contribution margins (61% in Q4 2024) and rising stock-based compensation expenses—a red flag for investors accustomed to high-margin tech firms.

The $500 million ATM equity offering announced alongside the partnership signals management’s focus on liquidity. With $788 million in unrestricted cash as of December 2024, Upstart has ample runway to weather potential headwinds like rising interest rates or regulatory scrutiny.

Rising rates could dampen loan demand, as seen in 2023 when mortgage applications fell 40% amid rate hikes. Upstart’s focus on unsecured personal loans may be less sensitive, but it’s a risk investors must weigh.

The AI Edge: Can Innovation Offset Challenges?

Upstart’s AI models, such as Model 19 and its Payment Transition Model (PTM), aim to reduce credit risk while expanding access to borrowers with limited credit history. These tools have enabled growth in niche markets like auto refinance and HELOC products, which now account for 20% of origination volume. However, regulatory scrutiny of AI’s fairness remains a wildcard. A March 2024 report highlighted concerns about algorithmic bias in lending—a challenge Upstart addresses by emphasizing “fairness-first” model design.

The Bottom Line: A Hold for Now, but a Buy on Dip?

Analysts remain cautious, with an average price target of $68.08 (a 42% upside from early 2025’s $47.69) and a “Hold” consensus. GuruFocus’s fair value estimate of $49.77 suggests limited near-term upside. Key catalysts ahead include May’s AI Investor Day and Q1 2025 earnings, which could clarify whether the Walmart partnership is accelerating loan originations or margins.

For investors, Upstart’s stock is a bet on long-term fintech disruption. Its $788 million cash balance and AI-driven moat position it to capitalize on post-pandemic credit demand—if macro risks subside. But with a 2025 P/S ratio of 4.2x (below peers like LendingClub’s 6.1x), the stock may offer value for those willing to wait.

Conclusion:
The Upstart-OneProgress partnership is a strategic win, but its payoff timeline is uncertain. Near-term investors face a trade-off between strong top-line growth and margin pressures, while long-term holders gain exposure to a fintech leader with AI-driven scalability. With a fair value estimate of $49.77 and a current price hovering around $48, the stock looks fairly priced—until the partnership’s impact materializes. Watch for May’s updates to gauge whether this alliance will finally tip Upstart from growth darling to profit machine.