Consumer lending company Upstart Holdings (NASDAQ:UPST) stock is down 20% in today’s pre-market session after it issued weak forward guidance.
However, at least one Wall Street investment bank is sticking by Upstart Holdings. Piper Sandler reaffirmed its “overweight” call on UPST stock immediately after the company’s latest quarterly results were released and reaffirmed its $300 price target on the stock.
In fact, the analyst went so far as to say that today’s decline represents a good buying opportunity for savvy investors.
What Happened With UPST Stock
Upstart Holdings reported earnings of 60 cents, beating analyst estimates for 33 cents. It also reported revenue of $228 million, which beat estimates for revenue of $214.9 million. This is a positive performance, but it seems many on Wall Street are disappointed. That is because in addition to beating quarterly estimates, Upstart shared weak guidance for the fourth quarter.
Specifically, Upstart said it expects revenues in a range of $255 million to $265 million, and net income of $16 million to $20 million. That comes in below expectations, and, as a result, UPST stock is down 20% this morning.
However, it would only be fair to note that UPST stock has had an amazing year. Shares are up more than 600% in the year to-date, having hit a 52-week, high of $401.49.
Why It Matters
The fact that Piper Sandler has defended Upstart in the wake of its latest earnings release is interesting.
On the surface, Piper Sandler reiterating its overweight rating and $300 price target suggests that market reaction to Upstart’s forward guidance is overblown. Under the surface, it might be the case that Piper Sandler has a sizable position of UPST stock and wants to keep the share price trending higher.
In a note to clients, Piper Sandler analyst Arvind Ramnani said that Upstart Holdings outperformance “was driven by continued loan volume growth and steady conversion rate” but the stock is down 20% because of “elevated investor expectations.” The analyst said that investors should view today’s pullback as a buying opportunity, saying that Upstart Holding’s “disruptive offering is improving outcomes for both borrowers and lenders, with the potential to disrupt several areas of lending.”
According to its website, Upstart Holdings uses an artificial intelligence (AI) lending platform that partners with banks and credit unions to provide consumer loans.
What’s Next for Upstart Holdings
UPST stock looks like it is going to take a hit today. The only question is how severe and prolonged the share price decline ultimately proves to be. But after running up more than 600% this year, Upstart Holdings stock might be due for a bit of a correction.
It should be noted that even Piper Sandler’s $300 price target is nearly 5% below where Upstart Holdings was at the close of trading yesterday.
While Piper Sandler might ultimately be right that there is more upside ahead for Upstart, investors should wait to see how far UPST stock falls in the near term before buying shares.
On the date of publication, Joel Baglole did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
