If you heard the name Upstart (NASDAQ:UPST), you probably wouldn’t realize which industry it operates in. Upstart is a company that utilizes artificial intelligence and machine learning to disrupt the personal loan and financial services industry. The company was founded back in 2012 by some ex-members of management from Google, and went public on the NASDAQ exchange on December 15 of 2020.
Shares of Upstart began trading at $20 per share, giving the company an initial public valuation of about $1.5 billion. In the eleven months since, UPST stock has skyrocketed, rising by over 147% since its debut on Wall Street. Why has Upstart performed so well? Let’s take a deeper dive at the Upstart Stock Forecast over the next few years.
AI Authorized Personal Loans
Upstart is apart of a growing number of companies that are disrupting the archaic financial services industry. Rather than having humans reviewing and authorizing each loan application, Upstart uses artificial intelligence to instantly grant or reject a user. It is a similar learning system to other companies like Lemonade (NYSE:LMND) for insurance and SoFi Technologies (NASDAQ:SOFI) for banking.
How efficient is Upstart’s system? In Q3 the company boasted that 67% of loan applications were instantly approved, with no additional calls or conversation with Upstart staff. Not only does this cut down on Upstart’s costs, but it has also opened up the personal loan approval process for a wider demographic of applicants.
Upstart has also recently added auto loans and has tripled the number of dealerships that use its platform year over year. This additional loan segment has caused a rapid increase in Upstart’s revenue, as the companies total revenue reached $849 million for the year, an increase of 264% from 2020. Certainly some impressive financial figures for such a young company.
“With triple-digit growth and record profits, Q4 was an exceptional finish to a breakout year for Upstart. 2021 will be remembered as the year AI lending came to the forefront, kicking off the most impactful transformation of credit in decades,
But AI lending isn’t a one-category phenomenon. I’m also happy to report that, with help from an epic push by our team in the last few weeks of the year, auto loan originations on our platform are now ramping quickly and will provide growth opportunities to Upstart for years to come.”said Dave Girouard co-founder and CEO of Upstart.
Upstart is also constantly growing its banking partners to provide its users with the best possible loan opportunities. The company recently added a partnership with BCU which is a top-100 credit union that provides services to well over 300,000 clients across the country. Other institutions Upstart has teamed up with this year include Four Corners Community Bank, Abound Credit Union, and WSFS Bank.
Upstart sell-off sees valuation fall below Wallstreet’s target
While Upstart skyrocketed following its IPO debut, the stock is currently trading 45% lower over the past 6 months. At UPST’s peak valuation, firms such as Bank of America raised the alarm bells on overvaluation. Now, even the lowest targets from Wallstreet imply a substantial upside.
In January, Piper Sandler analyst Arvind Ramnani reaffirmed his Upstart Stock Forecast with an Overweight rating and a $223 price target. The analyst cited Upstarts “continued loan volume growth and a steady conversion rate” in his bull thesis.
The analyst sees now as a buying opportunity, as Upstart has a disruptive offering that is improving outcomes across the lending business, for both lenders and consumers. The $223 valuation from Piper Sandler currently represents a huge upside of 200%.
Upstart Announces Share Repurchase Program
After the companies Q4 earnings, Upstart announced the Board of Directors approved a share repurchase program with authorization to purchase up to $400 million of common stock. Share buy backs are generally received well by shareholders, as it reduces the supply of stock available, increasing the share price.
“With the volatility in the trading of our stock, we have seen what we believe to be attractive buying conditions at various times over the past year, and our profitability puts us in a position to be able to initiate this program and take advantage of those situations on behalf of our shareholders,”said Sanjay Datta, CFO of Upstart.
The Bottom Line: Upstart Stock Forecast
Overall, Upstart as a business has reinvented the lending game as we know it. Upstart’s AI technology is improving outcomes for both lending institutions and their customers looking for financing. As a result, investors scrambled to purchase the stock before its valuation exceeded its upside. Upstart stock’s rise to popularity following its IPO is unique, and has provided early investors eye watering returns.
On the financial side, Upstart is already GAAP net income profitable, and is only beginning to tackle the loan market. In fact, Upstart estimates that the total addressable market for auto, mortgage, and personal loans exceeds $6 trillion. AI’s role in lending is expected to blossom over the next 5 years, with a recent study forecasting a value of $315 Billion in loans via AI underwriting expected in 2025.
Follow us on Google News
Follow us on Google News here to get minute-by-minute updates on when we post on any device via the Google News App.
The content above is strictly for informational purposes only and is not financial advice nor does it constitute a recommendation. Youth Investment Group has no liability for personal financial interests or investment decisions. You should make your own investment decisions based upon your own research and what you believe is best for you.