A Stock Deep Dive: Upstart Holdings (UPST)
Upstart (UPST) is a leading artificial intelligence (AI) lending platform that connects consumers with bank and credit union partners. The company uses machine learning models to assess borrowers’ creditworthiness based on more than 1,500 data points, including education, employment, and income. Upstart claims that its platform can approve more applicants at lower rates than traditional credit scoring methods.
Upstart went public in December 2021, raising $240 million in its initial public offering (IPO). The stock soared, reaching an all-time 52-week high of $72.58 in June. However, since then, the stock has plummeted more than 65%, closing at $23.73 on November 24, 2023. What caused this dramatic reversal, and is Upstart a good investment now?
One of the main reasons for Upstart’s decline was the slowdown in the personal loan market due to the COVID-19 pandemic and the economic recession. According to TransUnion, the total outstanding balance of personal loans dropped 6.6% year-over-year in the third quarter of 2022, and the number of new accounts fell 28.6%. Upstart’s revenue, which mainly comes from referral fees and platform fees from its bank partners, also declined 14.4% year-over-year in the third quarter of 2023, missing analysts’ expectations.
