Did you ever notice how fickle Wall Street can be? One month, everybody and his uncle loves Upstart (NASDAQ:UPST). The next month, both analysts and retail investors are massively bearish on UPST stock.
Maybe it’s because Upstart, as the name suggests, is starting up some trouble in the personal finance market. Indeed, old-school, traditional lenders undoubtedly feel threatened as Upstart is fomenting a revolution in the financial technology (fintech) space today.
In other words, Upstart is a divisive, love-it-or-hate-it type of company. And as a value investor, I’ll be the first to admit that UPST stock got ahead of itself earlier this year.
It’s a very different story today, however. After a share-price crash, now’s the perfect time to re-evaluate Upstart and, if you like the company’s bold vision, possibly even consider taking a long position.
A Closer Look at UPST Stock
To get some perspective, let’s start from the beginning. Upstart’s initial public offering (IPO) took place on Dec. 16, 2020, after the company priced its offering at $20 per share.
UPST stock’s first trade on the Nasdaq Exchange was for $26, and amazingly, the share price shot up 30% in afternoon trading on that first day.
The momentum continued for a while as the stock ran up to $100 in February of 2021, followed by $200 in August and $300 in September.
As the buying pressure mounted, UPST stock topped out slightly above $400 in mid-October. Then, a horrendous crash ensued.
Hopefully, some folks learned a valuable lesson about buying at high prices. Painfully, the Upstart share price tumbled to $200 and then $150 in December. By then, it seemed that only the company’s true believers remained in the trade.
So, are we dealing with a toxic asset here, or the buy-the-dip opportunity of a lifetime? The best place to look for clues is the hard data – after all, as they say, the numbers don’t lie.
Lots of Threes
Apparently, Upstart CEO Dave Girouard really likes the number three. Along with the release of Upstart’s third-quarter 2021 fiscal report, the CEO engaged in a bit of braggadocio based on that seemingly lucky number.
“Since Upstart’s IPO a year ago, we’ve more than tripled our revenue, tripled our profits, tripled the number of banks and credit unions on our platform, and tripled the number of auto dealerships we serve,” Girouard boasted.
The CEO then issued an unabashed metaphor, saying, “With that many 3s, Upstart is becoming the Steph Curry of the FinTech industry.”
Granted, Upstart’s third-quarter triple-play is backed by a bevy of data points. For instance, the company knocked it out of the park with $228 million in total revenue, representing a year-over-year increase of 250%.
A Chance to Outperform
While I’m at it, I should also mention that Upstart’s third-quarter adjusted EBITDA came in at $59.1 million. That’s a vast improvement from the $15.5 million reported in the year-earlier quarter.
Even with those impressive data points and Girouard’s penchant for pageantry, Upstart was surprisingly conservative with its recently issued earnings guidance.
“For Q4 2021, the company is guiding for revenues between $255 million and $265 million. Using the midrange of this guidance, this is about 14% sequential quarter-over-quarter growth. The company expects a contribution margin of 47%. This will translate to about $51 million to $53 million of EBITDA.”
a chance that Upstart will outperform this guidance, and I tend to concur with that assessment.
14% sequential quarter-over-quarter revenue growth isn’t asking for much, and this could be a setup for a massive earnings-report beat.
The Bottom Line
UPST stock appears to have flown too high, so a retracement was practically inevitable.
Yet, the correction may be overdone. A $400 price target is reachable as Upstart is demonstrating outstanding revenue growth.
Besides, Upstart’s conservative forward revenue guidance could lead to a major relief rally.
So, don’t miss out on UPST stock’s next rally as this fintech firm threatens the competition, and the traditional fintech market as we know it.
On the date of publication, David Moadel 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.