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Upstart Doubles in Short Order: Can Rally Continue?

Upstart (NASDAQ:UPST) is a fintech company that's seeing a lot of interest of late. Upstart's focus is on utilizing Artificial Intelligence (AI) to streamline the lending space,...
Upstart Doubles in Short Order: Can Rally Continue? © Reuters. Upstart Doubles in Short Order: Can Rally Continue?

Upstart (NASDAQ:UPST) is a fintech company that's seeing a lot of interest of late.

Upstart's focus is on utilizing Artificial Intelligence (AI) to streamline the lending space, improving upon the outdated credit scoring technology that has pushed qualified borrowers out of the market.

The company's focus up until now has been on unsecured personal loans. However, Upstart is making moves into the vehicle loan and mortgage market.

Long-term investors seem to like Upstart's growth, which has been impressive of late. Since its IPO, shares of UPST stock have absolutely skyrocketed. I am bullish on the stock.

Can this continue? Let's discusss. (See Upstart stock charts on TipRanks)

Huge Market Opportunity

The U.S lending market has traditionally relied on FICO scores to ascertain the loan eligibility of a borrower. Upstart uses AI and big data solutions to grasp a more holistic view of a given borrower's actual ability to pay back a loan.

This allows for better approval rates for loans, more borrowing for lenders, and a cut for Upstart.

The company's existing personal loan business carries a total market opportunity estimated at around $84 billion. However, Upstart's announced entry into the auto loan business could provide an additional $635 billion of market opportunity right now.

These markets are also growing fast, leading to impressive growth expectations among investors.

Ahead of the Competition

Upstart's AI and database provide the company with a unique edge among its competitors.

Among the factors investors are considering with Upstart is the company's treasure trove of data on borrowers. Reportedly, Upstart collects 1,600 details for each of its applicants, which is significantly higher than the 20 parameters considered in the FICO scorecard.

The company then compares the collected data against 10.5 million repayment events. It creates a specific AI model that enables the company to calculate lending risk for each applicant.

A report by the Consumer Financial Protection Bureau states that Upstart’s AI model has increased approval rates by 27%. In addition, this model has significantly lowered average interest rates by 16%. The new AI model has proven to be five-times more accurate and effective in predicting credit risk than that of the conventional framework.

With more loans originating through Upstart’s platform, the company is collecting more data. This allows the AI model to be more effective, thereby driving up approval rates and loan applications. Upstart had only 10 banking partners in September 2020, which soared to 25 banks and credit unions this year.

There is Risk Involved

Upstart is a comparatively new player in the automated lending market. Cross River Bank is one of its major banking partners, which accounted for nearly 63% of its revenue last year. This implies that if the company loses this core client, it could be in trouble.

Moreover, about 52% of Upstart’s web traffic comes through Credit Karma. Undoubtedly, it is very dependent on this partnership for seamless operations.

Accordingly, until Upstart diversifies out its customer portfolio, some investors may stay wary.

What are Analysts Saying about UPST?

As per TipRanks' analyst rating consensus, UPST stock is a Strong Buy. Out of six ratings, there are six Buy recommendations.

The average UPST price target is $207. Analyst stock price targets range from a low of $147 per share, to a high of $300 per share.

Bottom Line

Upstart has a market cap of $21.6 billion. However, the company's AI model and big data focus have given Upstart an advantage over the competition. Banking partners associated with Upstart registered $2.8 billion worth of loans through its platform in Q2.

Bolstered by upbeat Q2 results, Upstart has raised its forward revenue guidance to $750 million from $600 million. Should this momentum continue as advertised, UPST stock is certainly poised to continue along this trajectory.

Disclosure: At the time of publication, Chris MacDonald did not have a position in any of the securities mentioned in this article

Disclaimer: The information contained in this article represents the views and opinion of the writer only, and not the views or opinion of TipRanks or its affiliates, and should be considered for informational purposes only. TipRanks makes no warranties about the completeness, accuracy or reliability of such information. Nothing in this article should be taken as a recommendation or solicitation to purchase or sell securities. Nothing in the article constitutes legal, professional, investment and/or financial advice and/or takes into account the specific needs and/or requirements of an individual, nor does any information in the article constitute a comprehensive or complete statement of the matters or subject discussed therein. TipRanks and its affiliates disclaim all liability or responsibility with respect to the content of the article, and any action taken upon the information in the article is at your own and sole risk. The link to this article does not constitute an endorsement or recommendation by TipRanks or its affiliates. Past performance is not indicative of future results, prices or performance.

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28-09-2021 04:48:47 (UTC+7)

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EUR/USD

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 EUR/USD1.1698↑ Buy
 GBP/USD1.3704↑ Buy
 USD/JPY110.98↑ Sell
 AUD/USD0.7287Sell
 USD/CAD1.2626Sell
 EUR/JPY129.83↑ Buy
 EUR/CHF1.0832Neutral
 Gold1,750.15Sell
 Silver22.628Sell
 Copper4.2778↑ Sell
 Crude Oil WTI75.41↑ Sell
 Brent Oil78.58↑ Sell
 Natural Gas5.860↑ Buy
 US Coffee C194.98↑ Buy
 Euro Stoxx 504,165.48↑ Sell
 S&P 5004,443.11↑ Sell
 DAX15,573.88↑ Sell
 FTSE 1007,063.40↑ Sell
 Hang Seng24,208.78↑ Buy
 Small Cap 20002,281.79↑ Sell
 IBEX 359,002.90Buy
 BASF64.740↑ Sell
 Bayer47.47↑ Buy
 Allianz196.19↑ Buy
 Adidas278.80↑ Sell
 Lufthansa6.561↑ Buy
 Siemens AG147.27↑ Sell
 Deutsche Bank AG11.120↑ Buy
Mua/Bán 1 chỉ SJC
# So hôm qua # Chênh TG
SJC Eximbank5,665/ 5,715
(0/ 0) # 900
SJC HCM5,635/ 5,700
(0/ 0) # 885
SJC Hanoi5,635/ 5,702
(0/ 0) # 887
SJC Danang5,635/ 5,702
(0/ 0) # 887
SJC Nhatrang5,635/ 5,702
(0/ 0) # 887
SJC Cantho5,635/ 5,702
(0/ 0) # 887
Cập nhật 28-09-2021 04:48:49
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ↀ Giá vàng thế giới
$1,750.17+0.670.04%
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RON 95-IV2204022480
RON 95-II,III2194022370
E5 RON 92-II2071021120
DO 0.05S1658016910
DO 0,001S-V1693017260
Dầu hỏa1564015950
ↂ Giá dầu thô thế giới
WTI$75.41+0.290.38%
Brent$79.40+0.460.57%
$ Tỷ giá Vietcombank
Ngoại tệMua vàoBán ra
USD22.630,0022.860,00
EUR25.993,7727.346,60
GBP30.324,2231.591,18
JPY200,45212,05
KRW16,7520,39
Cập nhật lúc 18:54:42 27/09/2021
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