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Upstart Stock Plunges 20% in a Month: Should You Hold or Exit?
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Upstart Holdings, Inc. (UPST - Free Report) shares have plunged 20% over the past month and underperformed the Zacks Financial - Miscellaneous Services industry, which is down 10%. UPST stock has also underperformed other fintech competitors, including SoFi Technologies (SOFI - Free Report) , LendingClub (LC - Free Report) and Enova International (ENVA - Free Report) .
UPST One-Month Price Return Performance
Image Source: Zacks Investment Research
This steep decline raises the question: Should investors cut their losses and exit, or is the stock worth holding onto? While the near-term headwinds are real, Upstart Holdings’ long-term growth story remains intact, making a strong case for holding the stock.
Broader Market Weakness Drags UPST Lower
Upstart Holdings’ recent decline has more to do with broader market headwinds than company-specific challenges. A widespread tech sell-off fueled by fears of a global economic slowdown and escalating trade tensions has weighed heavily on high-growth stocks, including UPST.
Companies that have benefited most from the AI boom, like Upstart Holdings, are now experiencing valuation corrections. Despite the recent plunge, the stock is trading at a premium compared with the industry average. UPST trades at a forward 12-month price/sales (P/S) multiple of 3.73X, slightly higher than the industry’s 3.2X.
Image Source: Zacks Investment Research
Compared with major fintech rivals, the stock trades at a premium to LendingClub and Enova International while at a discount to SoFi Technologies. At present, LendingClub, Enova International and SoFi Technologies have P/S multiples of 1.19X, 0.76X and 3.79X, respectively.
Shares of Upstart Holdings have plunged 54.4% from the 52-week high of $96.43 (reached on Feb. 13) amid this broader correction. With the recent decline, Upstart Holdings’ shares have been down 28.6% year to date (YTD) against a YTD gain of 36.7% at their February peak.
Image Source: Zacks Investment Research
However, this correction doesn’t reflect Upstart Holdings’ strong operational performance or growth potential. Long-term investors should view this decline as a temporary setback rather than a sign of fundamental weakness.
UPST: A Disruptor in Automated Lending
Upstart Holdings has built its brand around using artificial intelligence (AI) and machine learning to assess creditworthiness, moving beyond outdated FICO scores to incorporate a range of variables like education and employment history. This data-driven model is helping the company automate the loan process.
In the fourth quarter of 2024, a whopping 91% of Upstart Holdings’ loans were fully automated. That kind of massive loan automation not only lowers costs but also enables faster approvals and more competitive rates, which provides a critical advantage in the personal lending market.
The bullish case for Upstart Holdings doesn't end with personal loans. The company is pushing into auto lending, home equity lines of credit (HELOC) and small-dollar relief loans — all showing robust growth. In the last reported quarter, auto originations jumped 60%, HELOCs grew 60%, and small-dollar loans surged 115% quarter over quarter. This strong growth was driven by improved models, rising conversion rates and enhanced automation tools like instant income verification.
Upstart Holdings’ biggest competitive advantage lies in its proprietary AI models, which continue to deliver superior accuracy in credit assessment. The introduction of Model 19 in the fourth quarter of 2024 is a game-changer. This model incorporates a new feature called the “payment transition model” (PTM), which evaluates intermediate delinquency states rather than just terminal loan outcomes. This enables Upstart Holdings to better assess risk and improve loan performance predictions, driving higher approval rates and lower default risks.
In addition, Upstart’s Model 18, launched earlier, introduced annual percentage rate (APR) as an input, significantly enhancing model accuracy. Combined, these innovations have led to loan approval rates nearly doubling in the fourth quarter — a testament to Upstart Holdings’ superior AI-driven underwriting capabilities. This technological edge positions the company to outpace traditional credit scoring models, boosting its growth potential.
Upstart Holdings’ Resilient Financial Strength
Upstart Holdings’ latest reported results for the fourth quarter of 2024 showcase its remarkable financial and operational growth. The company’s net revenues surged 56% year over year to $219 million, comfortably beating expectations. Revenues from fees, a core metric for Upstart Holdings, came in at $199 million, up 30% year over year and 19% sequentially. This growth was fueled by higher loan origination volumes and improved conversion rates, thanks to UPST’s advanced AI models.
Loan origination volume soared 89% year over year and 31% sequentially, reaching 246,000 loan transactions. This included 162,000 new borrowers, highlighting Upstart Holdings’ expanding customer base. The average loan size rose to $8,580, up from $8,400 in the previous quarter, reflecting enhanced credit quality and borrower trust.
Moreover, Upstart Holdings posted adjusted EBITDA of $39 million, marking its second consecutive quarter of positive EBITDA. The company came remarkably close to achieving GAAP profitability, with a net loss of just $2.8 million, a significant improvement from the prior quarters.
Upstart Holdings’ fourth-quarter non-GAAP EPS of 29 cents depicts a robust improvement from the year-ago quarter’s loss of 11 cents and a loss of 6 cents in the previous quarter. Quarterly earnings also surpassed the Zacks Consensus Estimate of a loss of 5 cents.
Its revenue growth guidance of 59% for full-year 2025 indicates continued growth momentum in the near term. The consensus mark for the 2025 bottom line is currently pegged at earnings of $1.37 per share, indicating a robust improvement from a loss of 20 cents reported in 2024.
Upstart Holdings, Inc. Price, Consensus and EPS Surprise
Upstart Holdings’ AI-powered innovation, robust financial growth and expanding loan offerings position it well for future growth. However, its high valuation makes it vulnerable to short-term volatility. For now, holding the stock is the smartest approach.
Image: Bigstock
Upstart Stock Plunges 20% in a Month: Should You Hold or Exit?
Upstart Holdings, Inc. (UPST - Free Report) shares have plunged 20% over the past month and underperformed the Zacks Financial - Miscellaneous Services industry, which is down 10%. UPST stock has also underperformed other fintech competitors, including SoFi Technologies (SOFI - Free Report) , LendingClub (LC - Free Report) and Enova International (ENVA - Free Report) .
UPST One-Month Price Return Performance
Image Source: Zacks Investment Research
This steep decline raises the question: Should investors cut their losses and exit, or is the stock worth holding onto? While the near-term headwinds are real, Upstart Holdings’ long-term growth story remains intact, making a strong case for holding the stock.
Broader Market Weakness Drags UPST Lower
Upstart Holdings’ recent decline has more to do with broader market headwinds than company-specific challenges. A widespread tech sell-off fueled by fears of a global economic slowdown and escalating trade tensions has weighed heavily on high-growth stocks, including UPST.
Companies that have benefited most from the AI boom, like Upstart Holdings, are now experiencing valuation corrections. Despite the recent plunge, the stock is trading at a premium compared with the industry average. UPST trades at a forward 12-month price/sales (P/S) multiple of 3.73X, slightly higher than the industry’s 3.2X.
Image Source: Zacks Investment Research
Compared with major fintech rivals, the stock trades at a premium to LendingClub and Enova International while at a discount to SoFi Technologies. At present, LendingClub, Enova International and SoFi Technologies have P/S multiples of 1.19X, 0.76X and 3.79X, respectively.
Shares of Upstart Holdings have plunged 54.4% from the 52-week high of $96.43 (reached on Feb. 13) amid this broader correction. With the recent decline, Upstart Holdings’ shares have been down 28.6% year to date (YTD) against a YTD gain of 36.7% at their February peak.
Image Source: Zacks Investment Research
However, this correction doesn’t reflect Upstart Holdings’ strong operational performance or growth potential. Long-term investors should view this decline as a temporary setback rather than a sign of fundamental weakness.
UPST: A Disruptor in Automated Lending
Upstart Holdings has built its brand around using artificial intelligence (AI) and machine learning to assess creditworthiness, moving beyond outdated FICO scores to incorporate a range of variables like education and employment history. This data-driven model is helping the company automate the loan process.
In the fourth quarter of 2024, a whopping 91% of Upstart Holdings’ loans were fully automated. That kind of massive loan automation not only lowers costs but also enables faster approvals and more competitive rates, which provides a critical advantage in the personal lending market.
The bullish case for Upstart Holdings doesn't end with personal loans. The company is pushing into auto lending, home equity lines of credit (HELOC) and small-dollar relief loans — all showing robust growth. In the last reported quarter, auto originations jumped 60%, HELOCs grew 60%, and small-dollar loans surged 115% quarter over quarter. This strong growth was driven by improved models, rising conversion rates and enhanced automation tools like instant income verification.
Upstart Holdings’ biggest competitive advantage lies in its proprietary AI models, which continue to deliver superior accuracy in credit assessment. The introduction of Model 19 in the fourth quarter of 2024 is a game-changer. This model incorporates a new feature called the “payment transition model” (PTM), which evaluates intermediate delinquency states rather than just terminal loan outcomes. This enables Upstart Holdings to better assess risk and improve loan performance predictions, driving higher approval rates and lower default risks.
In addition, Upstart’s Model 18, launched earlier, introduced annual percentage rate (APR) as an input, significantly enhancing model accuracy. Combined, these innovations have led to loan approval rates nearly doubling in the fourth quarter — a testament to Upstart Holdings’ superior AI-driven underwriting capabilities. This technological edge positions the company to outpace traditional credit scoring models, boosting its growth potential.
Upstart Holdings’ Resilient Financial Strength
Upstart Holdings’ latest reported results for the fourth quarter of 2024 showcase its remarkable financial and operational growth. The company’s net revenues surged 56% year over year to $219 million, comfortably beating expectations. Revenues from fees, a core metric for Upstart Holdings, came in at $199 million, up 30% year over year and 19% sequentially. This growth was fueled by higher loan origination volumes and improved conversion rates, thanks to UPST’s advanced AI models.
Loan origination volume soared 89% year over year and 31% sequentially, reaching 246,000 loan transactions. This included 162,000 new borrowers, highlighting Upstart Holdings’ expanding customer base. The average loan size rose to $8,580, up from $8,400 in the previous quarter, reflecting enhanced credit quality and borrower trust.
Moreover, Upstart Holdings posted adjusted EBITDA of $39 million, marking its second consecutive quarter of positive EBITDA. The company came remarkably close to achieving GAAP profitability, with a net loss of just $2.8 million, a significant improvement from the prior quarters.
Upstart Holdings’ fourth-quarter non-GAAP EPS of 29 cents depicts a robust improvement from the year-ago quarter’s loss of 11 cents and a loss of 6 cents in the previous quarter. Quarterly earnings also surpassed the Zacks Consensus Estimate of a loss of 5 cents.
Its revenue growth guidance of 59% for full-year 2025 indicates continued growth momentum in the near term. The consensus mark for the 2025 bottom line is currently pegged at earnings of $1.37 per share, indicating a robust improvement from a loss of 20 cents reported in 2024.
Upstart Holdings, Inc. Price, Consensus and EPS Surprise
Upstart Holdings, Inc. price-consensus-eps-surprise-chart | Upstart Holdings, Inc. Quote
Conclusion: Hold UPST for Now
Upstart Holdings’ AI-powered innovation, robust financial growth and expanding loan offerings position it well for future growth. However, its high valuation makes it vulnerable to short-term volatility. For now, holding the stock is the smartest approach.
Currently, Upstart Holdings carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.