A daily stock analysis based on stock market today
  • Daily Roll
  • YouTube
  • Podcast
  • Investor Hubs
    • Starter Investors Hub
    • Dividend Seekers Hub
    • The Risk Hub
    • COVID-19 Investing Hub
  • Sign Up

Upstart Holdings (UPST): Is it a buy?

6/17/2021

 

KEY POINTS

  • The stock market investors continue to celebrate the re-opening and worry about inflation at the same time.
  • Upstart Holdings (UPST) stock analysis shows a fintech company with a large market opportunity but too much reliance on a few key partners for growth. 

OVERALL MARKET

The stock market indices finished Thursday with mixed results one day after the Fed's discussed the possibility of two interest rate hikes in 2023. 

The weekly new jobless claims report came out, and there was a 37K increase compared to last week's figure.

Overall, the market is still trying to figure out whether the market is up for a correction due to forces such as inflation, or it can continue to rally thanks to the re-opening. 

THE ​MOST SUGGESTED STOCK

Today, I'm looking at one of the most suggested stocks by Stock Card VIP users. You may know that Stock Card VIP users have access to the "Our Strategy" section on each Stock Card. In this section, they can see two things:
  • Automated score our software develops to identify how good of a fit is any particular for a buy & hold, dividend, or speculative investment strategies.
  • They can also see why any of Stock Card's portfolio publishers bought or sold the stock. If no one has looked at the stock yet, VIP users have a chance to suggest the stock to portfolio publishers. It always ends up being an excellent source of new ideas by the VIP community. 
Let's get to stock analysis for one of the most suggested stocks by the Stock Card VIP community: Upstart Holdings Inc (NASDAQ: UPST)

WHAT'S UP?

Upstart Holding (UPST) stock analysis: The good stuff
Upstart Holding is a new IPO from Silicon Valley in the financial technology sector that happens to be profitable. It uses artificial intelligence to better match customers who look for a loan with lenders who would provide it. Of course, when you combine silicon valley, fintech, and profitability, you'd expect overvalued stocks. Indeed, with financial ratios such as price to earnings ratio or price to sales ratio, the stock is overvalued. The question is whether the overvaluation was justified. 

The company has high growth potential because it applies better technology in the financial sector. On the company's website, it claims that it's AI technology has been able to assess the creditworthiness of applicants better than traditional models, resulting in 26% more borrowers getting approved and yielding 10% lower average APRs for the approved loans. My husband and I just went through a mortgage application, and I know first-hand how inefficient and frustrating the mortgage underwriting process is. So that's certainly a reason to be excited about its future.

Going through its operational metrics, its revenue is expected to grow by $163% in the current fiscal year. The majority of loans that Upstarts processes are originated by its 12 bank partners, who originated about 170K loans in the first quarter of 2021. 

It's important that the company is only focused on personal loans and still has a large expansion opportunity to other credit products such as car loans or mortgages. That means the growth opportunity is quite large. 

WHAT'S DOWN

Upstart Holding (UPST) stock analysis: The good stuff
Now, let's turn our attention to some of the risks and shortcomings of Upstart. Inherently, all new IPOs are risky. In addition, the lack of operational information history makes our analysis harder than more established companies. That's why you see several grey areas on the company's Stock Card. 

The other challenge is that the company is entirely dependent on one of its partner banks for most of its revenue.  At the end of 2020, Cross River Bank (CRB) originated 67% of all the loans facilitated by Upstart and represented  63% of its total revenue. This means Upstart still has a long way to sell its product to other banks in the U.S.

We also can't forget about the competition. Artificial intelligence and modernization of banking infrastructure are a priority for almost all banks and credit unions. Upstart is not the only vendor in this market. Click on Credit Services' collection on the left-hand menu of Upstart's Stock Card, or type in credit services in the search bar, and 142 stocks appear on the list, Upstart being only one of them. It's not easy to develop a well-performing AI model to assess consumer creditworthiness, but Upstart isn't alone. We have seen how Lendingclub (LC) stock has struggled in the last few years, and these two companies offer a similar product. 

The last concern I have is that acquiring customers is quite expensive in the financial services industry. For example, upstart is entirely reliant on Credit Karma for more than 50% of its traffic. 

Put all the good and bad together, and I prefer to watch the stock for a few more quarters before jumping in. Upstart Holdings (UPST) stock analysis shows a fintech company with a large market opportunity but too much reliance on a few key partners to grow customers and revenue. Upstart is one of the so-called hidden gem smaller stocks that have created many conversations on social media, including Twitter. And, some risk-taker investors may jump in if they are comfortable with volatility. I prefer to watch it for a few more earnings releases before jumping in. 

​Want to receive this daily stock market recap report in your mailbox?

​Sign up for a free account on Stock Card's website to get the daily market recap reports in your inbox:
Give Stock Card a Try!

Comments are closed.

    RSS Feed


    Archives

    December 2022
    September 2022
    July 2022
    February 2022
    November 2021
    October 2021
    September 2021
    August 2021
    July 2021
    June 2021
    May 2021
    April 2021
    February 2021
    October 2020
    September 2020
    August 2020
    July 2020
    June 2020
    May 2020
    April 2020
    March 2020
    January 2020
    October 2019
    July 2019
    June 2019
    May 2019
    April 2019
    March 2019
    February 2019
    January 2019
    December 2018
    November 2018
    October 2018
    September 2018
    August 2018
    July 2018
    June 2018
    May 2018
    April 2018
    March 2018
    February 2018
    January 2018
    December 2017
    November 2017

    Categories

    All
    Battle
    Education
    ETF Investing
    How To Invest
    New Podcast Episode
    New Portfolio
    Portfolio Update
    Starter 2020
    Stock Card VIP Pick
    Stock Lists
    The Daily Hype
    Update
    Watchlist Worthy
    Winners And Losers

© 2017 StockCard.io. All Rights Reserved.
​​
Disclaimer: StockCard.io is not, neither operated by a broker, a dealer, or a registered investment adviser. Under no circumstances does any information posted on StockCard.io and Stock Card Weekly represent a recommendation to buy or sell a security. The information on this site, and in its related newsletters, is not intended to be, nor does it constitute, investment advice or recommendations. The Stock Card team may buy and sell securities before and after any particular article and report and information herein is published, with respect to the securities discussed in any article and report posted herein. In no event shall StockCard.io be liable to any subscriber, visitor, guest or third party for any damages of any kind arising out of the use of any content or other material published or available on StockCard.io, or relating to the use of, or inability to use, StockCard.io or any content, including, without limitation, any investment losses, lost profits, lost opportunity, special, incidental, indirect, consequential or punitive damages. Past performance is a poor indicator of future performance. The information on this site, and in its related newsletters, is not intended to be, nor does it constitute, investment advice or recommendations. The information on this site is in no way guaranteed for completeness, accuracy or in any other way.
  • Daily Roll
  • YouTube
  • Podcast
  • Investor Hubs
    • Starter Investors Hub
    • Dividend Seekers Hub
    • The Risk Hub
    • COVID-19 Investing Hub
  • Sign Up